The GDP of a country, measured at current prices, has doubled between…

The GDP of a country, measured at current prices, has doubled between two years. We cannot conclude from this alone that the volume of production has doubled, because:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → the prices of goods and services may also have changed

GDP at current prices can rise because output rises or because prices rise. If prices have doubled while output stayed the same, GDP also doubles.

Option (1) GDP at current prices includes intermediate goods — Incorrect. GDP counts only final goods. Intermediate goods are left out to avoid double counting.

Option (2) GDP at current prices excludes the output of foreign firms — Incorrect. GDP counts all production within the country, including that of foreign firms.

Option (3) GDP at current prices leaves out the production of services — Incorrect. GDP covers services as well as goods.

Option (4) the prices of goods and services may also have changed — Correct. A price rise alone can double GDP at current prices. Real GDP, at constant prices, shows the change in volume.

NCERT (2026-27): “2.4 Nominal and Real GDP … If we measure the GDP of a country in two consecutive years and see that the figure for GDP of the latter year is twice that of the previous year, we may conclude that the volume of production of the country has doubled. But it is possible that only prices of all goods and services have doubled between the two years whereas the production has remained constant. Therefore, in order to compare the GDP figures (and other macroeconomic variables) of different countries or to compare the GDP figures of the same country at different points of time, we cannot rely on GDPs evaluated at current market prices. For comparison we take the help of 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. …”