In a given year, nominal GDP grew by approximately 4%

Question

, while real GDP grew by only 2.3%
. This difference can be accounted for by the fact that _____.(1 point)
Responses

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

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

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

prices of goods and services increased 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.

Nominal GDP measures the value of all finished goods and services at current market prices, while real GDP adjusts for inflation, reflecting the true volume of production. The higher nominal GDP growth suggests that inflation was a factor, causing nominal figures to rise faster than real output.