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____________is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year and expressed in base-year prices.
- a)GDP at Current prices
- b)GDP at constant prices
- c)GDP at Market cost
- d)GDP at factor cost
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
____________is an inflation-adjusted measure that reflects the value o...
Real GDP is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (expressed in base-year prices) and are often referred to as "constant-price," "inflation-corrected" GDP.
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____________is an inflation-adjusted measure that reflects the value o...
Explanation:
Gross Domestic Product (GDP) is a measure of the economic performance of a country. It is the total value of all goods and services produced within the country's borders during a given period. However, since the prices of goods and services change over time, it is necessary to adjust the GDP for inflation to get a more accurate measure of economic growth.
GDP at constant prices is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year and expressed in base-year prices. In other words, it measures the actual value of goods and services produced, without the distortion of changes in prices.
Example:
Suppose that in the year 2020, the GDP of a country was $100 billion at current prices. If the inflation rate between 2020 and 2021 was 5%, the GDP at current prices for 2021 would be $105 billion (assuming no change in the quantity of goods and services produced). However, this does not necessarily mean that the country's economy grew by 5%. To get a more accurate measure of economic growth, we need to adjust the GDP for inflation.
Suppose that the base year for the calculation of constant-price GDP is 2020. We can calculate the GDP at constant prices for 2020 as $100 billion (since it is the same as the GDP at current prices). We can then calculate the GDP at constant prices for 2021 using the inflation rate of 5%. The GDP at constant prices for 2021 would be $110.25 billion (i.e., $105 billion adjusted for inflation).
Conclusion:
Therefore, GDP at constant prices is a more accurate measure of economic growth than GDP at current prices, as it reflects changes in the actual quantity of goods and services produced, rather than changes in prices.
Gross Domestic Product (GDP) is a measure of the economic performance of a country. It is the total value of all goods and services produced within the country's borders during a given period. However, since the prices of goods and services change over time, it is necessary to adjust the GDP for inflation to get a more accurate measure of economic growth.
GDP at constant prices is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year and expressed in base-year prices. In other words, it measures the actual value of goods and services produced, without the distortion of changes in prices.
Example:
Suppose that in the year 2020, the GDP of a country was $100 billion at current prices. If the inflation rate between 2020 and 2021 was 5%, the GDP at current prices for 2021 would be $105 billion (assuming no change in the quantity of goods and services produced). However, this does not necessarily mean that the country's economy grew by 5%. To get a more accurate measure of economic growth, we need to adjust the GDP for inflation.
Suppose that the base year for the calculation of constant-price GDP is 2020. We can calculate the GDP at constant prices for 2020 as $100 billion (since it is the same as the GDP at current prices). We can then calculate the GDP at constant prices for 2021 using the inflation rate of 5%. The GDP at constant prices for 2021 would be $110.25 billion (i.e., $105 billion adjusted for inflation).
Conclusion:
Therefore, GDP at constant prices is a more accurate measure of economic growth than GDP at current prices, as it reflects changes in the actual quantity of goods and services produced, rather than changes in prices.
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____________is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year and expressed in base-year prices.a)GDP at Current pricesb)GDP at constant pricesc)GDP at Market costd)GDP at factor costCorrect answer is option 'B'. Can you explain this answer?
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