how is it possible for nominal GDP to rise but real GDP to fall from one year to the next?

Yes, the given statement can be marked as true as it would indicate a larger rise in prices relative to a decrease in output.

Why would Nominal GDP increase but real GDP decrease?

When nominal GDP increases and it is higher than real GDP, then it shows that inflation is occurring but when real GDP is higher than nominal, then it means deflation is occurring.

In an economy with a high inflation, it will experience an increase in nominal GDP no matter if the real amount of goods and services produced decreases.

The GDP deflator measures the the overall change in prices in an economy, by using the ratio between real and nominal GDP.

Learn more about the real and nominal GDP here:-

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