What is the year whose prices are used to calculate the real GDP called?
- A.Fiscal year
- B.Base year
- C.Financial year
- D.Common year
Correct answer
Explanation
The correct answer is B, Base year. Real GDP measures the value of all final goods and services produced in a year at the prices of one fixed earlier year, called the base year, so that the effect of rising prices is removed and true growth can be seen. Nominal GDP uses the current year's prices. The ratio of nominal GDP to real GDP, multiplied by 100, is the GDP deflator, a measure of inflation. The base year is chosen by the government's statistics office and is revised from time to time so that it reflects the present structure of the economy. A is wrong because the fiscal year is simply the twelve months over which accounts are kept, April to March in India. C is wrong because financial year is another name for the same accounting period, not a price reference. D is wrong because 'common year' means a calendar year of 365 days, a term from the calendar, not economics. Exam tip: real GDP = base-year prices, nominal GDP = current prices; GDP deflator = nominal divided by real, times 100.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
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GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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