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Consider the following statements:
Nominal GDP is calculated so that the goods and services are evaluated at some constant prices.
Real GDP is the value of GDP at the current prevailing prices.
GDP Deflator gives an idea about the movement of prices from the base year.
Which of the statements given above is/are Correct?
- a)1 and 2 only
- b)2 and 3 only
- c)3 only
- d)2 only
Correct answer is option 'C'. Can you explain this answer?
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Consider the following statements: Nominal GDP is calculated so t...
Nominal GDP and Real GDP
- Nominal GDP refers to the value of goods and services produced in an economy, calculated at current market prices. It does not take into account the effect of inflation or changes in prices over time. Nominal GDP is calculated by multiplying the quantity of goods and services produced by their respective current market prices.
- Real GDP, on the other hand, is a measure of the value of goods and services produced in an economy, adjusted for changes in prices over time. Real GDP is calculated by multiplying the quantity of goods and services produced by their respective constant prices, which are usually based on a specific base year.
GDP Deflator
- The GDP deflator is a measure of the level of prices in an economy, calculated by dividing nominal GDP by real GDP and multiplying by 100. It provides an indication of the overall movement of prices from the base year.
- The GDP deflator is used to adjust nominal GDP to obtain real GDP. By comparing the two, we can isolate the effect of changes in prices on the value of GDP.
Explanation of statements
1) Nominal GDP is calculated so that the goods and services are evaluated at some constant prices.
- This statement is incorrect. Nominal GDP is calculated using current market prices, not constant prices.
2) Real GDP is the value of GDP at the current prevailing prices.
- This statement is incorrect. Real GDP is calculated using constant prices, not current prevailing prices.
3) GDP Deflator gives an idea about the movement of prices from the base year.
- This statement is correct. The GDP deflator is calculated by comparing nominal GDP (calculated at current market prices) and real GDP (calculated at constant prices). It provides an indication of how prices have changed since the base year.
Therefore, the correct answer is option C) 3 only.
- Nominal GDP refers to the value of goods and services produced in an economy, calculated at current market prices. It does not take into account the effect of inflation or changes in prices over time. Nominal GDP is calculated by multiplying the quantity of goods and services produced by their respective current market prices.
- Real GDP, on the other hand, is a measure of the value of goods and services produced in an economy, adjusted for changes in prices over time. Real GDP is calculated by multiplying the quantity of goods and services produced by their respective constant prices, which are usually based on a specific base year.
GDP Deflator
- The GDP deflator is a measure of the level of prices in an economy, calculated by dividing nominal GDP by real GDP and multiplying by 100. It provides an indication of the overall movement of prices from the base year.
- The GDP deflator is used to adjust nominal GDP to obtain real GDP. By comparing the two, we can isolate the effect of changes in prices on the value of GDP.
Explanation of statements
1) Nominal GDP is calculated so that the goods and services are evaluated at some constant prices.
- This statement is incorrect. Nominal GDP is calculated using current market prices, not constant prices.
2) Real GDP is the value of GDP at the current prevailing prices.
- This statement is incorrect. Real GDP is calculated using constant prices, not current prevailing prices.
3) GDP Deflator gives an idea about the movement of prices from the base year.
- This statement is correct. The GDP deflator is calculated by comparing nominal GDP (calculated at current market prices) and real GDP (calculated at constant prices). It provides an indication of how prices have changed since the base year.
Therefore, the correct answer is option C) 3 only.
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Consider the following statements: Nominal GDP is calculated so t...
Option (c) is the correct answer.
- Statement 1 is incorrect. Real GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices (or constant prices).
- Since these prices remain fixed, if the Real GDP changes, the volume of production undergoes changes.
- Statement 2 is also incorrect. Nominal GDP is the value of GDP at the current prevailing prices. The ratio of nominal to real GDP is called GDP Deflator.
- Statement 3 is correct. The ratio of nominal GDP to real GDP (GDP Deflator) gives an idea of how the prices have moved from the base year. KB)
- Nominal GDPIt is an assessment of economic production in an economy but includes the current prices of goods and services in its calculation.GDP is typically measured as the monetary value of goods and services produced.Since nominal GDP doesn't remove the pace of rising prices when comparing one period to another, it can inflate the growth figure.
- Real GDPIt is a measure of a country's total economic output that is adjusted for price changes.Real GDP makes comparison of GDP in different years more meaningful, because it allows comparisons of the actual volume of goods and services without inflation.Real GDP is calculated using a deflator or price index, a number that expresses prices in each year relative to a base year.
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Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer?
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Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer?.
Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: Nominal GDP is calculated so that the goods and services are evaluated at some constant prices. Real GDP is the value of GDP at the current prevailing prices. GDP Deflator gives an idea about the movement of prices from the base year. Which of the statements given above is/are Correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)2 onlyCorrect answer is option 'C'. Can you explain this answer?.
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