Suppose That the Nominal Value of GDP Increased by Approximately

question 122

Multiple Choice

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year, but real GDP decreased by 3 percent. Which of the following best explains these events?

• A) The money supply decreased by approximately 5 percent.
• B) Prices fell by approximately 5 percent.
• C) Prices increased by approximately 5 percent.
• D) The real productive capacity of the economy increased by approximately 5 percent.

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company.

LIFO

A method of inventory valuation called "Last-In, First-Out," where the most recently acquired items are the first to be expensed.

Tax Advantage

A tax advantage refers to the economic bonus that applies to certain investments or transactions that are favored by tax policy, allowing for a reduction in tax liabilities.