Why does infation make nominal GDP a poor measure of the increase in total produ

Question

Why does infation make nominal GDP a poor measure of the increase in total production from one year to the next? O A. Nominal GDP separates increases in GDP as a result of price changes fron increases in GDP as a result of quantity changes O B. GDP is a measure of production in quantity terms. O c when nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities D. All of the above OE. Aand B only How does real GDP deal with the problem inflation causes with nominal GDP? O A. Real GDP separates price changes from quantity changes. B. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced. ° C. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years O D. All of the above. O E. A and C only.

Explanation / Answer

1. The correct answer is C. Nominal GDP does not separate out the impact of inflation.

2. The correct answer is D.

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