The ratio of nominal to real GDP is a well known index of prices. This is called:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → GDP Deflator
Nominal GDP can rise because the economy produces more goods or because the same goods cost more. To separate the two, a year’s output is valued at that year’s prices (nominal GDP) and at base-year prices (real GDP). Dividing the first by the second cancels the quantities and leaves only the change in prices; this ratio of nominal to real GDP is the GDP deflator.
If nominal GDP is Rs. 200 and real GDP is Rs. 160, the deflator is 200/160 = 1.25: prices have risen by 25 per cent since the base year.
Why the other options are incorrect
Option (1) GDP per capita — Incorrect. GDP per capita is GDP divided by the population, the average output per person; it measures output per head, not prices.
Option (2) GNP — Incorrect. GNP is GDP plus net factor income from abroad, the output of a country’s normal residents; it is an aggregate of output, not a ratio of two GDPs.
Option (3) Inflation — Incorrect. Inflation is the rate at which the general price level rises over time; the GDP deflator is one of the indices from which that rate is measured, not the name of the ratio itself.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 13-05 S1 | 13-05 S2* | – | – | – |
* A similar question.
NCERT (2025-26): “2.4 Nominal and Real GDP … The ratio of nominal to real GDP is a well known index of prices. This is called GDP Deflator.…” |