Practicing Success
Practicing Success
CUET Preparation Today
Suppose a country only produces bread. In the year 2000 it had produced 100 units of bread, price was ₹ 10 per bread. In 2001, the same country produced 110 units of bread at price was ₹ 15 per bread. In 2001, the nominal and real GDP are : (base year is 2000) |
₹ 1,550 and ₹ 1,000 ₹ 1,400 and ₹ 2,000 ₹ 1,650 and ₹ 1,100 ₹ 1,500 and ₹ 1,000 |
₹ 1,650 and ₹ 1,100 |
The answer is ₹ 1,650 and ₹ 1,100 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. |
