Nominal GDP measures the value of goods and services produced in a year using the prices of that same year (current prices). Real GDP measures the value of goods and services produced in a year using the prices of a fixed base year. This is done to remove the effect of inflation and compare the volume of production across different years. Therefore, the base year is crucial for calculating real GDP, as its prices serve as a constant benchmark.
'Base year' in National Income accounting means -
Asked in RPSC RAS Prelims 2021 · Topic: National Income & Gross Domestic Product (Nominal vs. Real GDP and GDP Deflator)
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Answer: C. The year whose prices are being used to calculate the real GDP
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