Briefly explain whether you agree or disagree with the following statement: 'If a recession is so severe that the price level declines, then we know that both real GDP and nominal GDP must decline.'

Select one:

A.

Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall.

B.

Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise.

C.

Agree. If prices fall, real GDP and nominal GDP will both fall if output increases.

D.

Agree. If both output and prices are falling, then both real GDP and nominal GDP will fall.