GDP, real vs nominal, and the business cycle
Grade 12 Social Studies Worksheet - Building Confidence
Circle the best answer.
Read this first
U.S. GDP, 2019 to 2025
Year Nominal GDP (trillions of dollars) Real GDP (trillions of 2017 dollars) 2019 21.54 20.72 2020 21.38 20.28 2021 23.75 21.56 2022 26.06 22.08 2023 27.83 22.72 2024 29.38 23.39 2025 30.86 23.94 Note: BEA, gross domestic product, annual, as listed by FRED (series GDPA for nominal and GDPCA for real, in chained 2017 dollars), retrieved Nov 14, 2026; trillions of dollars. Card A: Nominal GDP values each year's output at that year's prices. Real GDP values output at 2017 prices, so it changes only when output changes; in 2017 itself the two were equal, 19.61. The GDP price index is nominal GDP divided by real GDP, times 100. Card B (in our words): The NBER dates peaks and troughs of the business cycle. It dated a peak in February 2020 and a trough in April 2020, and judged that two-month fall a recession because it was deep and spread across the economy. A contraction runs from a peak to a trough, and an expansion runs from a trough to the next peak.
Nominal GDP rose from 21.54 to 30.86 trillion between 2019 and 2025. Pia asks what the table says about output. Which statement fits best?
- Output rose about 43 percent, since nominal GDP is the measure of how much was produced
- Prices rose about 43 percent and output did not grow, since nominal growth is just prices
- Output rose about 16 percent (real 20.72 to 23.94); the rest of the 43 percent was prices
- Output rose about 16 percent and prices barely changed, since real growth is the whole story
In 2017 nominal and real GDP were both 19.61 trillion. Esme asks why. Which reason fits card A?
- Real GDP starts at 2017 because that was the first year BEA measured the economy
- Real GDP values output at 2017 prices, so in 2017 itself the two measures agree
- Nominal GDP values output at 2017 prices, so in 2017 it equals real GDP
- Prices did not change in 2017, so real and nominal GDP agree for that one year
In 2022 nominal GDP grew 9.7 percent and real GDP 2.4. Jun asks what that says about prices that year. Which statement fits?
- Prices rose 9.7 percent, the same as nominal growth, because nominal GDP follows prices
- Prices rose about 12 percent, the sum of the 9.7 percent and the 2.4 percent
- Prices fell about 7 percent, since real growth was below nominal growth that year
- Prices rose about 7 percent: the GDP price index went from 110.2 to 118.0
A headline says GDP was up 21 percent from 2019 to 2022. Kira checks the table. Which reply is best?
- The headline is right about output, since nominal GDP counts everything that was produced
- The headline is wrong, since GDP cannot rise 21 percent in three years
- Nominal GDP was up 21 percent, but real GDP, which removes price changes, rose about 7 percent
- Real GDP was up 21 percent too, since GDP is one number and the two tables agree
Real GDP fell 2.1 percent in 2020, yet card B says the contraction lasted two months. Milo asks how both can be true. Which fits?
- The annual fall shows the contraction really lasted twelve months, not two
- The year's real GDP fell because prices rose, not because output fell
- A deep fall over two months can pull the year's total below the year before
- One of them must be wrong, since a two-month fall cannot show up in a year of data
Noah asks why the NBER called a two-month fall a recession. Which reason fits card B?
- The year 2020 as a whole had lower real GDP, which makes the whole year a recession
- Nominal GDP fell that year, and any fall in nominal GDP counts as a recession
- It judged the fall deep and spread across the economy, so length was not the test
- Real GDP fell for two quarters in a row, which is the NBER's test for a recession
The NBER dated a trough in April 2020. Ren asks what a trough means and what phase follows it. Which answer fits card B?
- A trough is the start of a contraction, which ends at the next peak
- A trough is the high point of output, and a contraction follows it
- A trough means the economy has fully recovered, so no phase follows it
- A trough is the low point where the fall ends; an expansion follows it
Tala writes one claim from the table. Which claim does it support best?
- The economy grew 43 percent from 2019 to 2025, the rise in nominal GDP
- Families were 16 percent better off in 2025, since output rose 16 percent
- Real GDP was higher in 2025 than in any earlier year shown, up about 16 percent
- Real GDP fell in 2022 and 2023, because those were the years of the fastest price rises
A student says prices fell in 2020, since nominal GDP fell. Zee tests the claim with card A. What is the best reply?
- Yes: nominal GDP is the average level of prices, so a fall in it is a fall in prices
- Yes: real GDP fell more than nominal GDP, which can happen when prices fall
- No: the price index rose from 104.0 to 105.4; output fell, and nominal GDP fell with it
- No: nominal GDP cannot show anything about prices, since the table has no price figures
A reporter writes that the economy grew 5.0 percent in 2025, using nominal GDP. Ari suggests a better measure. Which is it?
- Real growth, about 2.4 percent (23.94 over 23.39), because it removes the rise in prices
- Nominal growth is the better measure, since it counts the full dollar value of output
- Neither measure is usable, because both nominal and real GDP are revised later
- Real growth, about 3.4 percent, because 23.94 minus 23.39 is 0.55 and prices are 5.0
