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.
Frequently asked questions
What is the correct answer to this question?
₹2,200
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
