Nominal vs. Real Output Growth Comparison

Steps:

• Nominal output is total output value (quantity times average price).
• Real output is nominal output divided by average price level (to adjust for inflation or deflation).
• Calculate year-over-year growth rates: percentage change in nominal and real output.
• Compare rates: real output growth exceeds nominal due to falling prices inflating real values.

Why B is correct:

• Real output = nominal output / price level; if prices fall, real growth outpaces nominal, per GDP deflator formula.

Why the others are wrong:

• A: Incorrect, as real growth faster implies nominal lagged, not led.
• C: Incomplete and false; no evidence of accelerating rates for either.
• D: Rates vary yearly, not constant for real output.

Final answer: B