Suppose, in Dollar Terms, Nominal GDP Increased Approximately 4 Percent

question 144

Multiple Choice

Suppose, in dollar terms, nominal GDP increased approximately 4 percent during a given year, and real GDP decreased 1 percent. Which of the following best explains these events?

• A) The money supply increased approximately 4 percent.
• B) Prices decreased approximately 3 percent.
• C) Prices increased approximately 4 percent.
• D) Prices increased approximately 5 percent.

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Definitions:

Marginal Analysis

An evaluation method that weighs the benefits of an additional unit of consumption or production against the cost to understand decision-making processes.

Opportunity Cost

The worth of the most favorable option given up when a choice is made.

Taco

A traditional Mexican dish consisting of a small hand-sized tortilla topped with a filling.

Burrito

A Mexican-inspired dish consisting of a large wheat flour tortilla wrapped or folded around a filling that typically includes meat, beans, rice, cheese, and vegetables.