Q. Consider the following statements regarding the types of Gross Domestic Product (GDP):
1.Nominal GDP is always lower than Real GDP since it does not account for inflation.
2.Real GDP enables comparison across years by adjusting for inflation using a price deflator.
3.GDP at Purchasing Power Parity (PPP) helps in comparing living standards across countries.
Which of the above statements is/are correct?
Answer: A
Notes:
Explanation:
- Nominal GDP is usually higher than Real GDP in times of inflation, not lower.
- Real GDP uses a price deflator to adjust for inflation and allow inter-year comparison.
- GDP at PPP adjusts for cost of living and price differences, allowing for better international comparisons.
Source: Laxmikant (Polity)
