Explain whether it is possible for nominal GDP to increase and ...

[Sufayan.ah]

Explain whether it is possible for nominal GDP to increase and real GDP to decrease in the same period.
 
  What will be an ideal response?

Question 2

First, define nominal GDP and real GDP. Second, is it possible for nominal GDP in a year to be less than real GDP in the same year? Explain.
 
  What will be an ideal response?

[Tonyam972]

Answer to Question 1

Nominal GDP can rise because either the price level is rising or the real quantity of goods and services produced has increased. Nominal GDP can increase while real GDP falls if the increase in the aggregate price level is larger (in a proportionate sense) than the drop in real economic activity.

Answer to Question 2

Nominal GDP represents the value of goods and services produced using current prices. Real GDP measures the value of the same goods and services using some base year prices. It is possible for nominal GDP to be less than real GDP in a given year. Given the definitions of the two variables, this will occur if prices in that year are simply less than prices in the base year. If, for example, the base year is 2002, it will generally be the case that nominal GDP will be less than real GDP for those years prior to 2002 given that prices have generally risen in all years.

[Sufayan.ah]

Thank you

[Tonyam972]

No problemo