GDP Real vs. Nominal GDP 2

Question 1

If nominal GDP rises from $20 trillion to $22 trillion but the price level rises by 10%, what happened to real GDP?

Accepted Answer

It stayed the same

Answer

A 10% nominal increase offset entirely by 10% inflation leaves real GDP unchanged.

Question 2

The GDP deflator for 2024 is 115 (base year 2020=100). If nominal GDP is $23 trillion, what is real GDP?

Accepted Answer

$20 trillion

Answer

Real GDP = (Nominal GDP / GDP deflator) × 100 = ($23T / 115) × 100 = $20 trillion.

Question 3

Which scenario represents an increase in real GDP with no change in nominal GDP?

Accepted Answer

Prices fall while output stays the same

Answer

If prices fall and output is unchanged, nominal GDP stays the same but real GDP rises because the deflator decreased.

Question 4

A country's real GDP fell despite a rising nominal GDP. This most likely means:

Accepted Answer

Inflation exceeded the growth rate of nominal GDP

Answer

Real GDP falls when the price level rises faster than nominal GDP, eroding real purchasing power.

Question 5

Which of the following is NOT used to adjust nominal GDP to real GDP?

Accepted Answer

Unemployment rate

Answer

The unemployment rate measures labor market conditions and is not a price measure used to deflate GDP.

GDP - Gross Domestic Product Practice Test