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CA Foundation · Business Economics · Determination of National Income

In a country, a fixed basket costs ₹500 in the base year and ₹650 in the current year. The base-year nominal GDP was ₹80 lakh crore, and real GDP at base-year prices in the current year is ₹88 lakh crore. Using the basket cost as the price index (base = 100) for converting, what would current nominal GDP be if all prices rose in line with the basket?

Current nominal GDP is ₹114.4 lakh crore. The basket index is 650 ÷ 500 × 100 = 130, and multiplying current real GDP of ₹88 lakh crore by 1.30 gives nominal GDP. Using base-year GDP of 80 would ignore the real output growth.

  1. A₹114.4 lakh croreCorrect
  2. B₹104.0 lakh crore
  3. C₹88.0 lakh crore
  4. D₹132.0 lakh crore

Explanation

Price index = 650/500 × 100 = 130. Nominal GDP = Real GDP × index/100 = 88 × 1.30 = ₹114.4 lakh crore. Check: 114.4/1.30 = 88. Option B applies 80 × 1.30, wrongly using base-year GDP rather than current real GDP.

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