Question

When measured over time, the nominal value of many economic variables systematically grows more rapidly than their corresponding real values. Why might this be? a. Because of errors in the data recording process. b. Because of population growth. c. Increases in productivity. d. Inflation.

Answer 1

The correct answer is d. Inflation.

When measured over time, the nominal value of many economic variables (such as wages, prices, GDP, etc.) tends to grow more rapidly than their corresponding real values. This phenomenon can be attributed to inflation, which is the general increase in prices over time.