Why is real per capita GDP considered better than nominal per capita GDP?
Answer and explanation
Correct answer: It accounts for both price and population effects
Nominal GDP per person is calculated using current prices and can rise merely because prices have increased. Real GDP uses constant or base-year prices, so it removes the effect of general price changes and gives a better measure of changes in actual output. Dividing real GDP by population also reflects the amount of real output per person. Hence option B is correct. It does not measure only exports, equalise distribution, or capture every non-market service.
Frequently asked questions
What is the correct answer to this question?
It accounts for both price and population effects
Why is this the correct answer?
Nominal GDP per person is calculated using current prices and can rise merely because prices have increased. Real GDP uses constant or base-year prices, so it removes the effect of general price changes and gives a better measure of changes in actual output. Dividing real GDP by population also reflects the amount of real output per person. Hence option B is correct. It does not measure only exports, equalise distribution, or capture every non-market service.
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.
