Question

Which of the following statements about GDP is correct?
A) Nominal GDP values production at constant prices, whereas real GDP values production at current prices.
B) Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process.
C) Nominal GDP consistently underestimates the value of production, whereas real GDP consistently overestimates the value of production.
D) Nominal GDP values production at current prices, whereas real GDP values production at constant prices.

Answer 1

✨✨ (C) is the correct answer ✨✨

Answer 2

Gross Domestic Product or GDP refers to the economic value of all the finished goods and services produced by a country in a year. It also includes the income earned by foreign residents within the said country but does not include the income earned by the residents residing abroad .

When the GDP is calculated at current prices it is referred as Nominal GDP but when GDP is estimated at constant prices it is called Real GDP.

Real GDP is lower than the Nominal GDP since it is calculated after adjusting inflation.

Option D is correct.