20 points State whether the statement is true or false Provi

[20 points] State whether the statement is true or false. Provide brief explanation for your answer. a. [10 points] Consumers can decrease consumption even if their disposable income has not changed b. [10 points] Nominal GDP can increase and real GDP decrease in the same period.

Solution

True. They can decrease consumption for example when their view about future precautionary demand for money increases. They are independent in choosing how much to consume

2 True nominal GDP may increase due to increase in prices only and not due to change in output. In that situation real GDP will decrease whileas nominal increases