Question

Year 1 GDP at current prices is 100
Year 2 GDP at current prices is110
Which of the following statements are correct?
A.The increase in GDP from year 1 to year 2 can be the result of an increase in the general price level.
B.The increase in GDP from year 1 to year 2 can be the result of an increase in real production.
C.From the given information, it is impossible to tell whether the 10% increase in GDP from year 1 to year 2 represents economic growth.
[1] All the statements are correct.
[2] a and b
[3] b and c
[4] a and c
[5] a

Answer 1

Since the GDP is calculated using the current price,then we can conclude that its nominal GDP. So , an increase in GDP is due to general increase in price level not general production.This qualifies first statement (A) 5, as the answer.