Question

Q21. If nominal GDP is rs 15000 cr and real GDP is 12000 or, then find GDP deflator. Also
explain which is better: nominal GDP or real GDP? state any one reason.
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Answer 1

Explanation:

The main difference between nominal GDP and real GDP is the adjustment for inflation. Since nominal GDP is calculated using current prices, it does not require any adjustments for inflation. ... Using a GDP price deflator, real GDP reflects GDP on a per quantity basis.

Answer 2

125 points

Explanation:

A measure of inflation is the GDP deflator, often known as the implicit price deflator.

It is the ratio of the value of goods and services produced by an economy in a given year at current prices (nominal GDP) to the value of goods and services produced during the base year at current prices (real GDP).

GDP Deflator = $\frac{Nominal GDP}{Real GDP} \times 100$ = 125 points

Real GDP is a better indicator, because it considers inflation while expressing the GDP of the economy.