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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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