Which of following statements about Nominal and Real GDP are correct?i. If a country’s Nominal GDP increases, this country may produce more, less or even the same amount of goods and services.ii. Nominal GDP is always larger than Real GDP. iii. Nominal GDP is a widely used measure for a country’s economic performance using current prices, due to its convenience of calculation and interpretation.iv. Real GDP controls for changes in preferences and prices.

Question

BlackTom AI · Accepted Answer

We start by restating the question and the four answer choices to ensure clarity about what is being evaluated.
Question: Which of following statements about Nominal and Real GDP are correct?
i. If a country’s Nominal GDP increases, this country may produce more, less or even the same amount of goods and services.
ii. Nominal GDP is always larger than Real GDP.
ii i. Nominal GDP is a widely used measure for a country’s economic performance using current prices, due to its convenience of calculation and interpretation.
iv. Real GDP controls for changes in preferences and prices.

Answer options:
a. iii
b. i, ii, iii
c. i, iii
d. i, ii, iii, iv

Option-by-option analysis:
Option a: iii alone. Is this the only statement true? The first part, i, says that nominal GDP increases can occur with more, less, or the same physical output due to price effects and quantity changes. This is a correct characterization of nominal GDP behavior—it moves with both prices and quantities, so it is not limited to purely price or purely quantity changes. Therefore, claiming only iii is true is incorrect because i is also a correct statement. The remainder of option a misses this, so option a is false.
Option b: i, ii, iii. This asserts i as true, iii as true, and also ii as true. We know ii states that Nominal GDP is always larger than Real GDP, which is not correct in general because nominal GDP can be lower than real GDP in cases of deflation or when price levels fall relative to base-year prices. Hence including ii makes this option false. Also, since ii is false, option b cannot be entirely correct.
Option c: i, iii. This choice includes i, which is correct as discussed, and iii, which describes Nominal GDP being used with current prices for convenience and interpretation; this is a common characteristic of nominal GDP. Crucially, iv is not included here, and indeed iv states Real GDP controls for changes in preferences and prices, which is inaccurate because Real GDP controls for price level changes but not changes in preferences per se. Thus option c aligns with the correct pair of statements and excludes the incorrect iv.
Option d: i, ii, iii, iv. This includes ii (false) and iv (arguably misleading about what Real GDP controls for), so this option is clearly incorrect.

Putting the pieces together, the only statements that are truly correct are i and iii, and any option that includes ii or iv is flawed. Therefore, the combination i and iii is the accurate set of true statements.

ECX2630 - ECX5630 - S2 2025 Quiz #1 - Preliminary Topic, Topics 1 and 2 (Not Assessed)

View Explanation

Log in for full answers

Similar Questions

An economy produces 500 apples at $2 each and 5 cars at $20,000 each. 1. Compute nominal GDP: [Fill in the blank], 2. If the base year price of apples is $1 and cars is $15,000, compute real GDP: [Fill in the blank],

If Country A's nominal and real GDP decrease, which of the following could be true?

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler