1.

Distinguish between real GDP and nominal GDP. Which is a better index of welfare of people and why?

Answer»
NOMINAL GDPREAL GDP
GDP measured in terms of current market prices is called nominal GDP.GDP computed at constant prices (base year price) is called real GDP
It shows real as well as monetary growth.It shows real growth  
It reflects overestimated GDP due to inflation.It neutralises the effects of inflation from GDP.
It is calculated by using formula value of output= Current year output x current priceIt is calculated by using formula value of output= Current year output x base years price


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