Declines in real GDP from one year to the next are likely to result in declines?

Question

Declines in real GDP from one year to the next are likely to result in declines in each of the following EXCEPT

(a) incomes.
(b) the standard of living.
(c) the employment level.
(d) employment opportunities.
(e) nominal GDP.

Answer 1

The answer is e. The other four, measured on an aggregate level, are real variables. If real GDP slows down, aggregate income will decline by definition. The standard of living on a whole will decline. Employment will drop, which will lower employment opportunities. However, nominal GDP could still go up, as the decline in real GDP would probably be a result of inflation, thus causing nominal to be inflated due to higher prices and not to higher output.

Answer 2

Not necessarily. Incomes could pretty much stay the same or stagnate, because people would not want to work for lesser pay.Employment level could be affected because companies with the slowdown in the economy would have to retrench and lay people off to remain viable, resulting to employment opportunities also exhibiting a decline. Standard of living could go either way, skilled workers gaining an edge because they have more marketable skills and thus enjoy a better standard of living compared to the less skilled or unskilled workers that would be laid-off, their standard of living would of course take a nose dive. Decline in nominal GDP would depend on the inflation rate, since price increases or inflation is the determinant of where real GDP is headed.