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:

Standard Rate

A predetermined cost or price used as a benchmark for evaluating the efficiency or effectiveness of operations.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a specific period, indicating under or overspending.

Variable Overhead

Costs that change with the level of production or service activity.

Activity Level

A metric indicating the volume or intensity of operations in a company, affecting its costs and resources.