Question

Submit Assignment Font Paragraph Styles gure 5.3 box or a file upload $14,062 $14,369 1. 2. Nominal GDP (in billions) Change in nominal GDP rive +5307 İd send via attachment in s. The question is worth 2 ing On- ing Focus- +-115% dill According to Table 5.3 in the Text GDP grew from $14.062 trillion in 2007 to $14.369 trillion in 2008, yet the quantity of output actually decreased. How is this possible?

Answer 1

There must be a rise in the price level, this is nominal GDP and the nominal GDP is calculated at the current prices so it is normal to fluctuate the nominal GDP even if there is a decrease in the output.

The nominal GDP is calculated by the price multiplied by the quantity of output, so even if there is a decrease in the quantity of output the rise in the price will increase the Nominal GDP.

Nominal GDP= Price $\times$ Quantity of output.

Ans: This is due to rise in the price level.