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What can be concluded about real welfare if nominal GDP rises only because prices rise?

Answer and explanation

Correct answer: An increase in real welfare is not proved

Nominal GDP is measured at current prices, so it can rise merely because the general price level has increased. If quantities of goods and services remain unchanged, real GDP may not increase at all. Since welfare depends more on real output, purchasing power, distribution, and quality of life than on money values alone, a nominal increase cannot prove greater real welfare. Thus option B is correct.

Related tags

Nominal GdpReal GdpPrice RiseWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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