NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
Nominal GDP of an economy grows from Rs 200 lakh crore to Rs 220 lakh crore in a year, while the GDP deflator rises from 100 to 105. Approximately what is the real GDP growth (base-year prices)?
Real GDP growth is about 4.76%. Deflating the nominal GDP of 220 by the deflator of 105 gives real GDP of about 209.52 against 200 earlier, an increase of 4.76%. Simply subtracting inflation from nominal growth gives only an approximate 5%.
- A10.00%
- B4.76%Correct
- C5.00%
- D15.00%
Explanation
Real GDP = Nominal / Deflator x 100. Year 1: 200. Year 2: 220/105 x 100 = 209.52. Growth = 9.52/200 = 4.76%. Using the 10% nominal growth ignores inflation; 10% minus 5% gives 5%, which is only an approximation, not exact.
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