Real GDP is calculated at:
Options
ACurrent Prices
BConstant Prices
CFuture Prices
DMarket Prices
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Determination of National IncomePYQ - May 2018 (Inter)Question 113 of 20
All Questions Correct Answer
✅ Option b — Constant Prices
All Options:
- ACurrent Prices
- BConstant Prices
- CFuture Prices
- DMarket Prices
Detailed Solution & Explanation
To calculate Real GDP, we need to understand the concept of GDP and its types.
• Real GDP is the total value of all final goods and services produced within a country, adjusted for inflation.
• It is calculated using a base year's prices to remove the effect of inflation, allowing for a more accurate comparison of GDP over time.
• The use of constant prices helps to distinguish between changes in the quantity of goods and services produced and changes in their prices.
The correct answer is based on the definition of Real GDP, which requires the use of constant prices to account for inflation and provide a more accurate picture of economic growth.
The incorrect options, such as current prices, would not account for inflation and would give a misleading picture of economic growth, while future prices are not relevant to the calculation of Real GDP.
About This Chapter: National Income
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Aggregates, Measurement, Keynesian Theory
A crucial chapter covering national income aggregates like GDP, GNP, NDP, NNP, and the methods of measuring national income (Income, Expenditure, and Output methods). It also introduces Keynesian Theory including the concepts of Aggregate Demand, Consumption Function, and the Multiplier.
View Official ICAI SyllabusExam Strategy Tip
Practice numerical questions on GDP/GNP calculations and the Multiplier. These are guaranteed marks in every exam. Also understand the circular flow of income clearly.
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