If Nominal GDP Exceeds Real GDP for a Specific Year

question 153

Multiple Choice

If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be

• A)equal to 100.
• B)greater than 100.
• C)less than 100.
• D)less than 0.
• E)equal to its value in the base year.

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Definitions:

Wealth-effect

The phenomenon where consumers spend more as the value of their assets, such as property or stocks, increases.

Real Wealth

The value of an individual's or entity's assets and resources, adjusted for inflation, reflecting the actual purchasing power over goods and services.

Aggregate Demand

The total demand for all goods and services within an economy at given price levels and in a given time period.

Short Run

A period during which at least one of a firm's inputs is fixed, only allowing the firm to vary some inputs while others remain unchanged.