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Question

Consider the following statements.

Assertion (A): Real GDP provides a better picture of the economy than nominal GDP.

Reason (R): Real GDP is calculated in a way such that the goods and services are evaluated after deducting the loss after depreciation.

Select the correct option from the given codes:

A A and R both are correct and R is the correct explanation for A. Correct Answer Incorrect Answer
B A and R both are correct but R is not the correct explanation for A. Correct Answer Incorrect Answer
C A is correct but R is incorrect. Correct Answer Incorrect Answer
D A is incorrect but R is correct. Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Real GDP : Real GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices (or constant prices).  Since these prices remain fixed, if the Real GDP changes we can be sure that it is the volume of production which is undergoing changes.

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