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What is the benefit of keeping base-year prices constant while calculating real GDP?

Answer and explanation

Correct answer: It allows comparison of output quantities across years

Real GDP is designed to measure changes in production rather than changes in prices. By valuing goods and services from different years at the same base-year prices, the price effect is held constant and output quantities become comparable. Therefore option A is correct. Constant prices do not make all prices identical, stabilize money supply, or eliminate imports.

Related tags

Constant PricesReal GdpOutput ComparisonGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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