Nominal GDP measures the value of output using:

Nominal GDP measures the value of output using:

• A. Prices from a base year
• B. Current prices prevailing in the year of production
• C. The price of the most expensive good
• D. A standardized international price

Answer: (B)

Nominal GDP expresses output in current-year prices, so it reflects the value of production using the prices that actually prevail when goods and services are produced. This means it captures both changes in how much is produced and changes in the price level (inflation or deflation). Because of that, nominal GDP can rise simply because prices rise, even if nothing else about production has changed. Using base-year prices would yield real GDP, which shows changes in quantity while holding prices constant. The other options don’t describe how the overall value of output is calculated: valuing everything at the price of the most expensive good isn’t how GDP is measured, and using a standardized international price would be a different adjustment rather than the standard nominal calculation.

Nominal GDP expresses output in current-year prices, so it reflects the value of production using the prices that actually prevail when goods and services are produced. This means it captures both changes in how much is produced and changes in the price level (inflation or deflation). Because of that, nominal GDP can rise simply because prices rise, even if nothing else about production has changed. Using base-year prices would yield real GDP, which shows changes in quantity while holding prices constant. The other options don’t describe how the overall value of output is calculated: valuing everything at the price of the most expensive good isn’t how GDP is measured, and using a standardized international price would be a different adjustment rather than the standard nominal calculation.