IAI Actuarial Core Principles · Business Economics · Business activity, unemployment and inflation
Real GDP of an economy was Rs 80 lakh crore in Year 1 and Rs 85.6 lakh crore in Year 2, measured at constant prices. What was the real growth rate for Year 2?
Real growth is 7.0%. The increase of Rs 5.6 lakh crore is divided by the Year 1 base of Rs 80 lakh crore, giving 0.07. Using the Year 2 figure as the base would understate the growth rate.
- A5.6%
- B6.5%
- C7.0%Correct
- D7.5%
- 8.0%
Explanation
Growth = (85.6 - 80)/80 = 5.6/80 = 0.07, or 7.0%. Check: 80 x 1.07 = 85.6. The 5.6% option wrongly treats the rupee change as a percentage. The 6.5% option divides by the Year 2 level (5.6/85.6).
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