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      Question

      A rise in nominal GDP accompanied by stagnant or

      declining real GDP in an economy most likely indicates:
      A Increase in industrial production Correct Answer Incorrect Answer
      B Growth driven by population increase Correct Answer Incorrect Answer
      C High inflation eroding real purchasing power Correct Answer Incorrect Answer
      D Increase in government capital expenditure Correct Answer Incorrect Answer
      E Robust rise in agricultural output Correct Answer Incorrect Answer

      Solution

      If nominal GDP (not adjusted for inflation) rises but real GDP (inflation-adjusted) stagnates, it shows that inflation is the primary driver of GDP growth, not actual output growth.

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