In a hypothetical country, Nominal GDP has increased by 5%

. Which of the following must be true?(1 point)
Responses

Prices have increased.
Prices have increased.

Either price, economic output, or both has increased.
Either price, economic output, or both has increased.

The quantity of economic output has decreased.
The quantity of economic output has decreased.

The quantity of economic output has increased.

1 answer

The correct answer is:

Either price, economic output, or both has increased.

An increase in nominal GDP indicates that the total monetary value of all goods and services produced in the economy has risen. This can occur due to an increase in prices (inflation), an increase in the quantity of goods and services produced (real economic growth), or a combination of both. Therefore, we cannot definitively say that prices have increased or that the quantity of economic output has increased or decreased without additional information.