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CSEET · Economic and Business Environment · National Income Accounting and Related Concepts

Nominal GDP of an economy rises from ₹200 lakh crore to ₹230 lakh crore, while the general price level rises by 15% over the same period. Taking the earlier year as base (price index 100), what is the approximate change in real output?

Real output is unchanged. Nominal GDP rose 15%, but prices also rose 15%, so deflated GDP is 230 divided by 1.15, which equals ₹200 lakh crore, same as the base year. This shows why nominal GDP can mislead about actual growth.

  1. AReal output rises by 15%
  2. BReal output is unchangedCorrect
  3. CReal output falls by 15%
  4. DReal output rises by 30%

Explanation

Nominal GDP growth is 30/200 = 15%. Prices rose 15%, so real GDP = 230/1.15 = ₹200 lakh crore, the same as before. Saying real output rises 15% ignores the price effect, which is the mistake of reading nominal growth as real growth.

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