Question

Suppose the country of Altaria only produces one style of good, pink tutu. Last year, nominal GDP was $50,000 and this year it is $200,000. What can be definitively conclude

Answer 1

Answer:

None of the above

Explanation:

The missing options are:

• Output in Altaria quadrupled
• The rate of unemployment decreased
• Standard of living in Altaria increased
• All of the above
• None of the above

The only thing that we can be 100% certain is that the monetary value of output in Altaria quadrupled. The nominal GDP measures the total production of new and finished goods and services in a country during a year. It doesn't consider inflation, real GDP does.

In this case, if inflation increased dramatically, say 400%, the output didn't change at all, only the nominal monetary value increased. A rise in inflation would decrease the standard of living in the country. The unemployment rate may or may not have increased.