question_answer

If the real GDP is Rs. 3,000 and price index is 175, then calculate the nominal GDP. What does the price index of 175 indicate?

Answer:

Given, Real Gross Domestic Product =Rs. 3,000, and Price Index =175 We know that, \[Price\text{ }Index=\frac{No\min al\,\,GDP}{\operatorname{Re}al\,\,GDP}\times 100\] \[\Rightarrow \]   \[175=\frac{No\operatorname{minal}\,GDP}{3,000}\times 100\] \[\Rightarrow \]   \[Nominal\,\,GDP=175\times 30\]                         = Rs. 5,250             The price index of 175 indicates that as compared to the base year, the prices have increased by 75%. in current year