If the Growth Rate of Nominal GDP and the Rate

question 163

Multiple Choice

If the growth rate of nominal GDP and the rate of inflation in an economy are 4 percent and 1 percent,respectively,the growth rate of real GDP in the economy must be ________.

• A) 1 percent
• B) 3 percent
• C) 4 percent
• D) 5 percent

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Definitions:

Comparative Advantage

A principle that states a country should produce goods and services at a lower opportunity cost than its trade partners.

Monetary Cost

The total amount of money that is spent in order to purchase goods or services.

Resources

Inputs or assets used in the production of goods and services, including labor, capital, and natural materials.

Absolute Advantage

The advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does.