What happens when nominal GDP increases but output stays the same?
Answer (1)
It means there is inflation. Prices are going up, but we are not producing more goods or services. For example, if the number of bread loaves sold stays at 1,000 per day but the price of each loaf increases from ₱20 to ₱25, the nominal GDP will show growth, but there’s no real increase in production. This is why economists prefer looking at Real GDP, which removes the effect of price changes and focuses only on actual output.
