Economics > QUESTIONS & ANSWERS > Robert E. Lee High School (Texas) - ECONOMICS 101Real vs Nominal GDP (All)

Robert E. Lee High School (Texas) - ECONOMICS 101Real vs Nominal GDP

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Part 1: Check Your Understanding- Answer the questions. 1. If your nominal wage increases by 25%, will you definitely have a 25% increase in purchasing power? Why or why not? Not necessarily, usin... g the Real GDP can more accurately showcase how much purchasing power increased from the year before as nominal wage only showcases the current year and does not account for inflation. 2. If your nominal wage rises from $10 to $12 while the CPI rises from 150 to 180 will your real wage increase, decrease, or stay the same? Explain. Your real wage would stay the same as the percentage increase of your nominal wage and CPI is 20%. 3. If nominal GDP increased by 20% and inflation increased by 10%, did the real GDP increase, decrease, or stay the same? Explain? The real GDP would increase due to the increase of the nominal GDP being greater than the inflation rate, even though goods and services may have not increased, the real GDP has. [Show More]

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