Author Question: Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must always be higher ... (Read 134 times)

craiczarry · **on:** Jun 29, 2018

Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must always be higher than real GDP. Do you agree or disagree? Why?

What will be an ideal response?

Question 2

During the recession phase of the business cycle

A) unemployment is usually falling. B) production is usually rising.
C) interest rates are usually falling. D) income is usually rising.

ashely1112 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Disagree. It depends on whether the year being examined is before or after the base year. If after the base year, then nominal GDP will always exceed real GDP if inflation has occurred. If before the base year, then nominal GDP will always be less than real GDP if inflation has occurred. If the year being examined is before the base year and inflation has occurred, then the base year prices will exceed the prices of that year.

Answer to Question 2

C