Question
Mario and Lucia are discussing current economic data printed in the morning newspaper. Mario is quite happy about the fact that nominal GDP has increased
Mario and Lucia are discussing current economic data printed in the morning newspaper. Mario is quite happy about the fact that nominal GDP has increased at a steady rate for the last two years and asserts that this is very good news, since it means they are better off than a few years ago. Lucia warns Mario about his conclusions and suggests that she has observed a steady increase in many prices during the same period, which might undermine Mario's conclusion. Based on this information:
a) Who do you think is right? Explain why.
b) Is it possible that Mario and Lucia could be worse off than two years ago?
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