REAL INCOME AND
NOMINAL GDP
Real GDP OR GDP at
constant prices is very useful index to the measure of real or actual
growth of an economy . It is define as the value of current output at same base
year prices. It is obtained b multiplying the good and services produced in the
base or constant year. This is estimate is a reliable index of economic growth
of a country.
Nominal GDP
or GDP at current prices is a poor index to measure the eco. growth of a
country. It is define as the value of current output at current year prices. It
is obtained by multiplying the goods and services produced in the current
year.. It is also called monetary GDP.
Conversion of GDP at Current prices
into GDP at Constant prices: - GDP at current prices includes changes in
the price to neutralize the effect into GDP at Constant price.( Real GDP)
GDP at
CONSTANT PRICES = GDP at Current Prices / Price index for the current year X
Base year
GDP
DEFLATOR: - It is the average level of prices of all goods and services that
make GDP.
It is
calculated as GDP Deflator = Nominal GDP/ Real GDP X 100.
Numerical Problems -
1. GDP at Current price is 1,50,000 and price index for the
current year is Rs.150/-.Find GDP at constant prices.
2. If the real GDP is Rs.400 and Nominal GDP is 450,
Calculate the price index?
3. How Real GDP at constant prices is a index of welfare in
the economy.
4. There is unequal distribution of income in the economy.
How increase in the GDP may be the index of welfare? Explain.
5. Explain the effect of externalities on the welfare of the
people? In which conditions externalities increases economics welfare of the
society.
6. India economy is growing economy in the world still in
some part of Indian economy, barter system is used for exchange. How it effect
the index of welfare?
7. Does GDP a appropriate Index of Welfare? Explain.
8. Distinguish
between Real GDP and Nominal GDP.
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