Final answer:
Nominal GDP in 2018 must be less than Real GDP in 2018, given the base year is 2022 and there has been positive inflation since 2018. Inflation tends to 'inflate' nominal GDP, making nominal GDP higher in years after the base year and lower in years before it when compared to real GDP.
Step-by-step explanation:
When considering nominal GDP and real GDP, it is essential to understand the impact of inflation on these measures. The student's question pertains to whether nominal GDP in 2018 must be less, equal, or greater than Real GDP in 2018, given that the base year is 2022 and prices have been rising since 2018. As inflation indicates an increase in the general price level over time, it inflates the nominal GDP, which is the gross domestic product measured at current market prices.
Given that inflation has been positive and prices have been rising since before the base year of 2022, the correct answer would be that nominal GDP in 2018 must be less than Real GDP in 2018. This is because real GDP is adjusted for changes in price level and reflects the value of goods and services produced in an economy at constant prices. Therefore, in years prior to the base year, real GDP would typically be greater than nominal GDP when inflation is present.
For example, if you look at a graph showing U.S. nominal and real GDP since 1960, with 2005 as the base year, the nominal and real values coincide at that base year. However, in years following the base year, the nominal GDP line rises more steeply due to inflation exaggerating the increase in nominal terms. Conversely, in years before the base year, real GDP figures tend to be higher than nominal GDP figures due to the adjustment for inflation.