Real National Income Measured in Constant Prices

Real national income is the nominal national income adjusted for inflation. It is the measurement of the actual purchasing power of a nation's income. Real national income is measured in constant prices, which means that it is adjusted for inflation and reflects the purchasing power of a currency at a specific point in time.

Constant Prices vs. Current Prices

Current prices refer to the value of goods and services at the time of purchase. They are not adjusted for inflation and do not reflect the true purchasing power of a currency. In contrast, constant prices take inflation into account and provide a more accurate measurement of a nation's economic performance.

Wholesale Prices vs. Retail Prices

Wholesale prices refer to the price at which goods are sold in bulk to retailers. Retail prices, on the other hand, refer to the price at which goods are sold to consumers. While both wholesale and retail prices can be used to measure inflation, they are not as accurate as constant prices because they do not take into account changes in the overall economy.

Importance of Measuring Real National Income

Measuring real national income is important because it allows policymakers to make informed decisions about the economy. By adjusting for inflation, policymakers can see the true economic growth of a nation and make decisions based on that information. Real national income is also important for businesses because it allows them to make informed decisions about investment and production.

Conclusion

Real national income is the measurement of a nation's income adjusted for inflation. It is measured in constant prices, which take into account changes in the overall economy. Measuring real national income is important for policymakers and businesses because it provides an accurate measurement of a nation's economic performance.

Real national income (GDP) or GDP at constant prices mean the market value of final goods and services produced within the domestic territory of a country no matter who generates it, as estimated using base year prices. It gives a better picture of GDP growth as in this case, GDP can increase only when there is increase in quantity of the goods as prices are taken to be constant.
Real GDP = Q × P•
where, Q =quantities of goods and services and,
P• = Prices of goods and services which is taken as constant in the above case.