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If monetary GDP rises because prices increase while output remains unchanged what can be said about real welfare?

Answer and explanation

Correct answer: A monetary rise alone does not prove an increase in real welfare

Nominal or monetary GDP can increase simply because prices are higher. If the quantity of goods and services produced remains unchanged, real GDP has not necessarily increased. Since real welfare is more closely related to actual output, purchasing power, distribution and living conditions, a price-driven rise alone cannot prove that welfare has improved. Thus option B is correct.

Related tags

Price RiseNominal GdpReal WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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