SSC GD 2026 PYQ — Question 35

Correct Answer:

High inflation

Explanation:

Nominal GDP measures the value of all finished goods and services produced at current market prices, whereas real GDP measures economic output adjusted for price changes (inflation). When nominal GDP grows faster than real GDP, it signifies that the increase in economic value is primarily driven by rising prices rather than an increase in the physical volume of goods and services produced. This divergence reflects a rising general price level, indicating high inflation within the economy.

Key Points:

The GDP deflator, which measures the overall level of prices in an economy, is calculated as the ratio of nominal GDP to real GDP.

When the GDP deflator increases significantly, it confirms that inflation is pushing nominal output figures higher relative to real output.

Real GDP remains the more accurate indicator of actual economic growth because it strips out the distorting effects of inflation.

Important Questions and Answers:

Question: How is the GDP deflator calculated using nominal and real GDP?

Answer: By dividing nominal GDP by real GDP and multiplying by 100.

Question: Which type of GDP accounts for inflation by using constant base-year prices?

Answer: Real GDP.