An increase in nominal GDP will:

• A. mean that inflation has decreased
• B. show that the unemployment rate has fallen
• C. reflect a rise in the value of goods and services at current prices
• D. always indicate an increase in real output

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of nominal GDP. Nominal GDP measures the total market value of all final goods and services produced within a country in a given period, valued at current prices, without adjusting for inflation.
2. Step 2: Recognize that an increase in nominal GDP can result from either an increase in the quantity of goods and services produced (real output) or an increase in the prices of those goods and services (inflation), or both.
3. Step 3: Note that nominal GDP does not distinguish between changes due to price level changes and changes due to output changes. Therefore, an increase in nominal GDP does not necessarily mean that real output has increased.
4. Step 4: Understand that inflation decreasing would typically reduce nominal GDP growth if output remains constant, so an increase in nominal GDP does not imply inflation has decreased.
5. Step 5: Realize that nominal GDP alone does not provide direct information about unemployment rates, so an increase in nominal GDP does not necessarily show that unemployment has fallen.