If the Nominal GDP Rises by 3 Percent and the Price

question 105

Multiple Choice

If the nominal GDP rises by 3 percent and the price level rises by 5 percent, then the real GDP ________ by ________ percent.

• A) rises; 8
• B) falls; 8
• C) rises; 2
• D) falls; 2
• E) None of these answers is correct.

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Definitions:

Stable Inflation

A situation in which the rate of inflation is low and changes very slowly over time.

Marginal Tax Rate

The amount by which taxes increase from an additional dollar of income.

Interest Income

Earnings received from investments in financial assets like savings accounts, certificates of deposit, or bonds, typically expressed as a percentage of the principal.

Aggregate Demand

The aggregate need for every product and service in an economy, measured at a specific overall price level during a certain time frame.