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

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

net exports were positive during the year
net exports were positive during the year

net exports were negative during the year

Answer 1

The correct response is:

prices of goods and services increased during the year

This is because nominal GDP measures the value of all finished goods and services at current prices, while real GDP adjusts for inflation to reflect the actual volume of production. The difference between the two growth rates indicates that inflation occurred, leading to a higher nominal GDP growth compared to real GDP growth.