Answer to Question #137302 in Macroeconomics for Ayman Rizwan

Question

If nominal GNP increases over a time then real GNP will also increase with time. True/False? Explain your answer

Answer 1

False.

Nominal GNP is measured at current market prices and does not factor for inflation.

Real GNP is computed at constant prices and adjust for inflation where it is expressed in terms of prices prevailing in the base year.Thus,nominal GNP usually exceeds real GNP because of inflation.