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Question : 22
Total: 52
(i) Using a suitable numerical example, distinguish between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product (GDP).
(ii) State the meaning of 'normal resident' of a country.
(ii) State the meaning of 'normal resident' of a country.
Solution:
(i)
(ii) Normal Resident: A normal resident of a country is said to be one:
1. Who normally resides in a country for more than one year. He may or may not be the citizen of the country.
2. His economic interest should lie in that country or the country should be his place of economic activities (production, consumption and investment).
| Basis of Difference | Nominal GDP | Real GDP |
|---|---|---|
| Meaning | It is market value of final goods and services produced within the domestic boundary of a country in an accounting year, estimated at current year prices. | It is market value of final goods and services produced within the domestic boundary of a country in an accounting year, estimated at base year prices. |
| Also known as | It is also known as GDP at current prices. | It is also known as GDP at constant prices. |
| Example | Nominal GDP | Real GDP =Current Year Quantity |
| Indicator of economic growth | It is not a true indicator of economic growth of a country. | It is a true indicator of economic growth of a country. |
(ii) Normal Resident: A normal resident of a country is said to be one:
1. Who normally resides in a country for more than one year. He may or may not be the citizen of the country.
2. His economic interest should lie in that country or the country should be his place of economic activities (production, consumption and investment).
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