ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Real GDP is a better indicator of economic growth because it can be compared with base year GDP. While nominal GDP cannot be compared to any previous year’s GDP.

Detailed explanation-2: -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-3: -The most common way to measure the economy is real gross domestic product, or real GDP. GDP is the total value of everything-goods and services-produced in our economy.

Detailed explanation-4: -Real GDP is calculated as nominal GDP less inflation.

Detailed explanation-5: -The GDP growth rate is measured relative to last year’s GDP. Usually the Growth numbers that make headlines on the news are of what economists usually call “Real GDP, ” meaning that it is already corrected for changes in prices (inflation).