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Base-year prices of rice and milk are ₹30 and ₹50 respectively. In the current year, 40 units of rice and 20 units of milk are produced. What is real GDP?

Answer and explanation

Correct answer: ₹2,200

Real GDP values current-year quantities at base-year prices, so it removes the effect of current price changes. For rice, the value is 40 units × ₹30 = ₹1,200. For milk, it is 20 units × ₹50 = ₹1,000. Adding the two values gives real GDP of ₹2,200. Therefore, option C is correct. Using current prices instead would calculate nominal GDP, not real GDP.

Related tags

Real GdpConstant PricesBase-Year PricesQuantity CalculationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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