State the two principal differences between GDP at current prices and GDP at constant prices.
State the two principal differences between GDP at current prices and GDP at constant prices.
The two principal differences between GDP at current prices (nominal GDP) and GDP at constant prices (real GDP) are as follows:
(i) GDP at current prices is market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at current year prices. On the other hand, GDP at constant prices is market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at the base year prices.
(ii) GDP at current prices can increase even when there is no increase in the flow of goods and services in the economy, but in the price level happens to rise. In contrast, GDP at constant prices will increase only when there is an increase in the flow of goods and services in the economy.
The two principal differences between GDP at current prices (nominal GDP) and GDP at constant prices (real GDP) are as follows:
(i) GDP at current prices is market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at current year prices. On the other hand, GDP at constant prices is market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated at the base year prices.
(ii) GDP at current prices can increase even when there is no increase in the flow of goods and services in the economy, but in the price level happens to rise. In contrast, GDP at constant prices will increase only when there is an increase in the flow of goods and services in the economy.
