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In which situation would growth in nominal GDP least reliably indicate an increase in welfare?

Answer and explanation

Correct answer: When growth is mainly due to a rise in the general price level

The governing concept is the distinction between nominal and real GDP. Nominal GDP equals the value of current production at current prices, so it can rise solely because the general price level increases. If real output does not improve, purchasing power and actual welfare may not increase. Therefore, option D is correct. Options A, B, and C describe real production or social improvements that provide stronger evidence of welfare gains.

Related tags

Nominal GdpPrice LevelReal WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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