ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -By eliminating the distortion caused by inflation or deflation or by fluctuations in currency rates, real GDP gives economists a clearer idea of how the total national output of a country is growing or contracting from year to year.

Detailed explanation-2: -Consequently, real GDP provides a more accurate portrait of economic growth than nominal GDP because it uses constant prices, making comparisons between years more meaningful by allowing for comparisons of the actual volume of goods and services without considering inflation.

Detailed explanation-3: -GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well.

Detailed explanation-4: -Real GDP is a macroeconomic statistic that measures the value of the goods and services produced by an economy in a specific period, adjusted for inflation. Essentially, it measures a country’s total economic output, adjusted for price changes.

Detailed explanation-5: -Economists track real gross domestic product (GDP) to determine the rate at which an economy is growing without any of the distorting effects of inflation. The real GDP number allows them to measure growth more accurately.