If the Percent Change in Real GDP Is 5% and Inflation

question 135

Multiple Choice

If the percent change in real GDP is 5% and inflation rate is 1%, what is the percent change in nominal GDP?

• A)0%.
• B)2%
• C)4%.
• D)6%.

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Definitions:

Budget Constraint

An economic model that represents all the combinations of goods and services that a consumer can afford with a fixed amount of income.

Goods

Physical items that are produced and consumed by individuals or businesses to satisfy needs or wants.

Marginal Rate

The rate at which one variable changes relative to a change in another variable, often used in the context of marginal tax rates or marginal rates of substitution.

Convex Preferences

A preference structure where the consumer prefers mixed bundles of goods to extreme bundles, represented graphically by a bowed-inward indifference curve.