If Nominal GDP Increases 4 Percent During a Year, and Real

question 89

Multiple Choice

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

• A) The total value of GDP must have increased 11 percent during the year.
• B) The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year.
• C) The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year.
• D) Imports must have been about 3 percent larger than exports during the year.

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Definitions:

Capital and Financial Account

A component of a country's balance of payments that records investment flows and purchasing of domestic firms by foreign investors, and vice versa.

International Transfers

Financial transactions where funds are sent across national borders, either by governments, businesses, or individuals.

Balance of Payments

A record of all economic transactions between the residents of a country and the rest of the world in a particular period.

Goods and Services

Refers to the physical products and intangible services that are produced and consumed by individuals or businesses.