CBSE 2019 Class 12 Economics Outside Delhi Set 1

Question : 14

Total: 24

Explain the meaning of Real Gross Domestic Product and Nominal Gross Domestic Product, using a numerical example.

Solution:

Real GDP refers to the money value of all the final goods and services calculated at a base year price produced with in the domestic territory in a given time period.
Nominal GDP refers to the money value of all the final goods and services calculated at a current year prices produced with in the domestic territory in a given time period.

Commodities	Quantity in 2018	Price in 2011	Prices in 2018	RealGDP	Nominal GDP
A	10	5	10	50	100
B	15	7	10	105	150
C	20	10	15	200	300
D	5	12	15	60	75
Total				415	725

In the above table real GDP is ₹415 for the year 2018 while nominal GDP is ₹725 for the same year. Such a difference in GDP is due to increase in prices from base year to current year. Therefore, Real GDP is always considered as true indicator of economic growth.

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