The real gross domestic product (GDP) is calculated in a way such that, the goods and services are evaluated at _____.
Show answer & explanation
Correct answer: A
Explanation
Correct Answer:
Option 1: some constant set of prices
Explanation: Real GDP is calculated by measuring the value of goods and services at constant prices of a base year. This removes the effect of inflation, revealing the actual growth in the economy's output.
Additional Facts:
Nominal GDP: It is calculated at current market prices.
GDP Deflator: It is the ratio of nominal GDP to real GDP, reflecting changes in the price level in the economy.
Possible Questions for the Upcoming Exam:
What is the difference between nominal GDP and real GDP called?
(Answer: GDP Deflator).
What is the current base year for GDP calculations in India?
(Answer: 2011-12).