An economy produces only one good. In the base year it produced 200 units at Rs 5 per unit. In the current year it produced 230 units at Rs 6 per unit. By what percentage have nominal GDP and real GDP grown?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Nominal GDP by 38 per cent, real GDP by 15 per cent
Given:
Base year: 200 units at Rs 5
Current year: 230 units at Rs 6
Nominal GDP uses current prices. Real GDP values the current output at base-year prices.
Base-year GDP = 200 × 5 = Rs 1,000
Current nominal GDP = 230 × 6 = Rs 1,380, a rise of 38 per cent
Current real GDP = 230 × 5 = Rs 1,150, a rise of 15 per cent
The extra 23 points of nominal growth come only from the rise in price. 20 per cent is the rise in price, not in real GDP.
NCERT (2026-27): “2.4 NOMINAL AND REAL GDP … 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 we can be sure that it is the volume of production which is undergoing changes. Nominal GDP, on the other hand, is simply the value of GDP at the current prevailing prices. For example, suppose a country only produces bread. In the year 2000 it had produced 100 units of bread, price was Rs 10 per bread. GDP at current price was Rs 1,000. In 2001 the same country produced 110 units of bread at price Rs 15 per bread. Therefore nominal GDP in 2001 was Rs 1,650 (=110 × Rs 15). Real GDP in 2001 calculated at the price of the year 2000 (2000 will be called the base year) will be 110 × Rs 10 = Rs 1,100.” |