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Current Affairs·Easy

An economy has reported an increase in GDP at factor cost at constant prices. In this case, which of the following is/are necessarily true about the economy? 1. The economy has produced more goods and services in the current period, compared to the previous period. 2. The general price level of the goods and services in the economy is showing an upward trend. Select the correct answer using the code given below:

An economy has reported an increase in GDP at factor cost at constant prices. In this case, which of the following is/are necessarily true about the economy?

1. The economy has produced more goods and services in the current period, compared to the previous period.

2. The general price level of the goods and services in the economy is showing an upward trend.

Select the correct answer using the code given below:

Options

  1. a.

    1 only

    Correct answer
  2. b.

    2 only

  3. c.

    Both 1 and 2

  4. d.

    Neither 1 nor 2

Explanation

  • GDP at factor cost at constant prices is factored for inflation and is called ‘Real GDP’. Thus, an increase in GDP at factor cost at constant prices necessarily indicates growth in the production of goods and services.
  • Since GDP at factor cost at constant prices is factored for inflation, it does not reveal any data on price level in the economy.

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