In a given year, nominal GDP grew by approximately 4% , while real GDP grew by only 2.3% . This difference can be accounted for by the fact that _____.(1 point)

Question

Responses

prices of goods and services decreased during the year
prices of goods and services decreased during the year

net exports were negative during the year
net exports were negative during the year

prices of goods and services increased during the year
prices of goods and services increased during the year

net exports were positive during the year

Answer 1

The difference between nominal GDP growth (4%) and real GDP growth (2.3%) can be accounted for by the fact that prices of goods and services increased during the year.

When nominal GDP grows faster than real GDP, it indicates that some of the growth in nominal terms is due to rising prices rather than an actual increase in the volume of goods and services produced.