Economic Awareness - Sectors of Indian Economy
During a year, Nominal GDP increased by 10% and Real GDP increased by 6%. What is the approximate inflation rate indicated by the GDP deflator?
During a year, Nominal GDP increased by 10% and Real GDP increased by 6%. What is the approximate inflation rate indicated by the GDP deflator?
hard Q10 of 15
Step-by-Step Solution
Step 1: Understand relationship between Nominal and Real GDP growth
Nominal GDP growth = Real GDP growth + Inflation rate (approximate)Step 2: Calculate inflation rate
Inflation rate ≈ Nominal GDP growth - Real GDP growth = 10% - 6% = 4%Step 3: Analyze options
4% inflation matches the difference between Nominal and Real GDP growth rates.Final Answer:
4% → Option BQuick Check:
Inflation ≈ Nominal GDP growth - Real GDP growth = 4% ✅
Quick Trick: Inflation ≈ Nominal growth minus Real growth
Common Mistakes:
- Confusing inflation with Real GDP growth or adding growth rates.
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