Answer the Question on the Basis of the Following Information

question 79

Multiple Choice

Answer the question on the basis of the following information: $\begin{array}{c}\begin{array}{c}\\\underline{\text { Year }} \\1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\text { Nominal}\\\underline{\text { GDP } }\\ \$ 550 \\560 \\576 \\586 \\604\end{array}\begin{array}{c}\text { Price}\\\underline{\text { Index}}\\140 \\135 \\120 \\117 \\108\end{array}\end{array}$
In the economy above:

• A) the price level is rising faster than nominal GDP.
• B) nominal and real GDP are growing at the same rate.
• C) the growth of nominal GDP understates the growth of real GDP.
• D) the growth of nominal GDP overstates the growth of real GDP.

---

Definitions:

Raw Material Needs

The quantity of raw materials required to meet production schedules and maintain inventory levels.

Net Operating Income

A company's income after subtracting operating expenses but before deducting taxes and interest charges.

Variable Selling Expense

Costs that vary directly with the level of sales, such as commissions for sales personnel, shipping charges, and promotional expenses.

Manufacturing Overhead

All indirect costs associated with the production process, including but not limited to utilities, rent, and salaries of non-direct labor.