Krugman's Economics For The Ap® Course
Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
Question
Book Icon
Chapter 3R, Problem 9MCQ
To determine

The question requires us to identify the true option when the real GDP is greater than the nominal GDP.

Expert Solution & Answer
Check Mark

Explanation of Solution

To remove the effect of price change (or inflation), the base-year price is used in the calculation of Real GDP while the price of the current year is used in the calculation of nominal GDP.

If the real GDP in a year is greater than the nominal GDP in the same year, then it reflects the higher price in the base year. 

If the real GDP in a year is less than the nominal GDP in the same year, then it reflects prices were lower in the base year than in the current year.

So, in the current year if real GDP is greater than nominal GDP then the price level has reduced since the base year.

Thus, option “a” is correct.

Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education