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Answer
Nominal GDP is the total value of all goods and services produced in a country, measured at current prices, without adjusting for inflation. The GDP deflator is a measure that reflects the prices of all new, domestically produced, final goods and services in an economy. If the nominal GDP increases and the GDP deflator stays the same, it means that the increase in nominal GDP is not due to higher prices but rather an increase in the actual quantity of goods and services produced. Therefore, we can conclude that real GDP, which accounts for inflation and measures the true growth of the economy, has also increased. For example, if a country produced more cars and houses this year than last year, and the prices of these goods did not change, the rise in nominal GDP indicates real economic growth.
Detailed Explanation
This statement is true. Other options are incorrect because This answer is based on a misunderstanding.
Key Concepts
Real GDP vs. Nominal GDP
GDP Deflator
Budget Deficits
Topic
Calculating Real GDP and Deficits
Difficulty
medium level question
Cognitive Level
understand
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