If Nominal GDP Increased from $4 Billion to $5 Billion

question 111

Multiple Choice

If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3 billion to $4 billion, it follows that:

• A)the price level and real output increased at the same rate.
• B)real output rose and price level fell.
• C)the price level increased at a faster rate than real output.
• D)the price level rose by 25%.

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Definitions:

Profit-maximizing Price

The pricing strategy where a firm sets the sale price of its products to achieve the highest possible profit.

Profit-maximizing Price

The price level at which a company can sell its product to achieve the highest possible profit, based on costs, demand, and competition.

Ameritech

A telecommunications company that was one of the Regional Bell Operating Companies following the breakup of AT&T.

Marginal Cost

The incremental cost of fabricating one more unit of a product or service.