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In which situation would growth in nominal GDP be an especially misleading signal of welfare improvement?

Answer and explanation

Correct answer: When most of the growth is caused by high inflation

Nominal GDP is valued at current prices, so its growth combines changes in physical output with changes in the price level. If most growth comes from rapid inflation, the quantity of goods and services may have risen little or even fallen in real terms. Option B is therefore correct. Stable prices with higher output are less misleading, while population and public-service changes require separate analysis.

Related tags

Nominal GdpInflationReal GdpGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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