If nominal GDP rises by 15% and the general price level rises by 10%, approximately how much did real output rise?
Answer and explanation
Correct answer: About 5%
The governing distinction is between nominal GDP, measured at current prices, and real output, which removes the effect of price changes. For an approximate calculation, real growth equals nominal GDP growth minus inflation: 15% − 10% = 5%. Therefore B is correct. Adding the rates gives 25%, while choosing 15% or 10% ignores either inflation or output growth. The exact rate is slightly different under division, but the intended approximation is 5%.
Frequently asked questions
What is the correct answer to this question?
About 5%
Why is this the correct answer?
The governing distinction is between nominal GDP, measured at current prices, and real output, which removes the effect of price changes. For an approximate calculation, real growth equals nominal GDP growth minus inflation: 15% − 10% = 5%. Therefore B is correct. Adding the rates gives 25%, while choosing 15% or 10% ignores either inflation or output growth. The exact rate is slightly different under division, but the intended approximation is 5%.
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.
