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5 May, 16:55

Which of the following statements about GDP is correct? a. Nominal GDP values production at current prices, whereas real GDP values production at constant prices.

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  1. 5 May, 20:12
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    Real GDP @ Constant Prices, Nominal GDP @ Current Prices

    Explanation:

    GDP is sum total of gross value of goods produced by an economy in its domestic territory during a given period of time (financial year).

    'Value' = Price X Quantity.

    Nominal GDP takes current year prices to calculate GDP, Real GDP Constant (Base Year prices) to calculate GDP. So - Real GDP is a better measure of Economic Growth because it changes only due to change in 'quantity' of pr0duction (prices same), but - Nomial GDP is a worse measure of Economic growth because it changes not only with 'quantity' of production & also with price change only (current price).

    Hence, Real GDP is also better for time series or Cross sectional Comparison.

    However, Nominal GDP can be converted into Real GDP using GDP Deflator

    (Nominal GDP / Real GDP) x 100
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