Consider the following statements 1 Nominal GDP is calculated so that the goods and services are eva...........

Indian Economic System Growth and development

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Consider the following statements:

1. Nominal GDP is calculated so that the goods and services are evaluated at some constant prices.

2. Real GDP is the value of GDP at the current prevailing prices.

3. GDP Deflator gives an idea about the movement of prices from the base year.

Which of the statements given above is/are correct?

1 and 2 only

2 and 3 only

3 only

2 only

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Explanation:

Statement 1 is incorrect. Real GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices (or constant prices).

Since these prices remain fixed, if the Real GDP changes, the volume of production undergoes changes.

Statement 2 is also incorrect. Nominal GDP is the value of GDP at the current prevailing prices. The ratio of nominal to real GDP is called GDP Deflator.

Statement 3 is correct. The ratio of nominal GDP to real GDP (GDP Deflator) gives an idea of how the prices have moved from the base year.