Economic Awareness - Sectors of Indian Economy
Which of the following statements is correct about the relationship between Nominal GDP and Real GDP during inflation?
Which of the following statements is correct about the relationship between Nominal GDP and Real GDP during inflation?
medium Q5 of 15
Step-by-Step Solution
Step 1: Understand inflation impact
Inflation causes prices to rise, increasing Nominal GDP which is measured at current prices.Step 2: Compare growth rates
Real GDP is adjusted for inflation, so it reflects actual output growth, which is slower than Nominal GDP growth during inflation.Final Answer:
Nominal GDP grows faster than Real GDP → Option AQuick Check:
Nominal GDP grows faster than = correct ✅
Quick Trick: Nominal GDP includes inflation effect, Real GDP excludes it
Common Mistakes:
- Assuming Real GDP grows faster during inflation or both grow equally.
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