Consider the following statements:1. GDP evaluated at current market price is not the right metric to compare the GDP figures of different countries. 2. Nominal GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices. 3. If the Real GDP changes, we can be sure that it is the volume of production which is undergoing changes. Which of the above statements is/are correct?

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The correct answer is 1 and 3. Analysis of StatementsGDP evaluated at current market price is not the right metric to compare the GDP figures of different countries.Correct. GDP at current market prices (Nominal GDP) is influenced by inflation and fluctuating exchange rates. Because different countries have different price levels and currency values, comparing them directly using current market prices can be misleading. Economists typically use Purchasing Power Parity (PPP) or Real GDP for more accurate international comparisons.Nominal GDP is calculated in a way such that the goods and services are evaluated at some constant set of prices.Incorrect. This is the definition of Real GDP. Nominal GDP evaluates goods and services at current year prices. Because it uses current prices, Nominal GDP can increase simply because prices went up (inflation), even if the actual output of goods remained the same.If the Real GDP changes, we can be sure that it is the volume of production which is undergoing changes.Correct. Real GDP is calculated using a base year (constant prices). By keeping prices fixed, any change in the Real GDP value must mathematically result from a change in the physical quantity (volume) of goods and services produced.

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1 and 2

Answer

2 and 3

Answer

1, 2 and 3

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JKPSC JKAS 2022 Prelims

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