2021 · Q1
Which one of the following statements is not correct ?
General KnowledgeIndian Economy
- AReal GDP is calculated by valuing outputs of different years at common prices.
- BPotential GDP is the real GDP that the economy would produce if its resources were fully employed.
- CNominal GDP is calculated by valuing outputs of different years at constant prices.
- DReal GDP per capita is the ratio of real GDP divided by population.
Explanation
Nominal GDP is measured at current-year market prices, not at constant prices; valuing different years' output at constant (base-year) prices is precisely the definition of real GDP, which strips out inflation. Real GDP therefore values outputs of different years at common prices, and real GDP per capita is real GDP divided by population. Potential GDP is the real GDP the economy would produce at full employment of resources. Since statement C reverses the nominal/real definitions, it is the one that is not correct.