Final answer:
The statement that nominal GDP is always greater than real GDP is false. The relationship between nominal and real GDP depends on whether there is positive inflation relative to the base year, with nominal GDP being higher post-base year with positive inflation and real GDP being higher pre-base year.
Step-by-step explanation:
The statement 'For every year, nominal GDP is always greater than real GDP' is false. Nominal GDP represents the total output of a country valued at current market prices, whereas real GDP is nominal GDP adjusted for inflation using the prices from a base year. Therefore, whether nominal GDP is greater than real GDP depends on the level and direction of inflation relative to the base year.
Inflation plays a critical role in determining the relationship between nominal and real GDP. If inflation is positive, which means prices are increasing on average from year to year, then it's expected that real GDP will be less than nominal GDP for any year after the base year; the value of nominal GDP is "inflated" by the rising prices. Conversely, real GDP should be greater than nominal GDP in any year before the base year, when prices were lower.
Looking at historical data, such as U.S. nominal and real GDP since 1960 with 2005 as the base year, it's evident that the nominal GDP line often rises more steeply than the real GDP line due to the influence of inflation, particularly in high inflation periods like the 1970s.