If Both Nominal GDP and Real GDP Increase from One

question 109

Multiple Choice

If both nominal GDP and real GDP increase from one year to the next, but the increase in real GDP is smaller than that of nominal GDP, we can conclude that:

• A) prices went up, but output stayed the same.
• B) prices stayed the same, but output went up.
• C) both prices and output went up.
• D) both prices and output stayed the same.

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Definitions:

Economic Profit

The difference between total revenues and total economic costs (including both explicit and implicit costs), reflecting the additional income generated over and above the opportunity costs.

Normal Rate

A standard or typical rate used as a benchmark or point of reference, often in contexts like interest rates or economic growth rates.

Short Run

A period in which at least one input (such as plant size, machinery) is fixed and cannot be changed by the firm.

Capital Investment

Funds invested in a firm or enterprise for the purpose of furthering its business objectives, including purchasing assets or stocks.