To compare the GDP figures of different countries, ____ (Real GDP/Nominal GDP) gives better results.
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To compare the GDP figures of different countries, ____ (Real GDP/Nominal GDP) gives better results.
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To compare the GDP figures of different countries, Real (Real GDP/Nominal GDP) gives better results.
Explanation:-
Real GDP is better than Nominal GDP as it truly reflects the growth of an Economy.
Real GDP is calculated at the base price. It changes when the quantity produced changes. If the Quantity produced is less, it decreases and vice-versa.
When quantity produced decreases, It shows a fall in the GDP of the country which is the indication of less job opportunity and vice-versa.
On the other hand,
The Nominal GDP is calculated at the current prevailing prices
It changes even when the price changes.
The Nominal GDP can rise due to the rise in the market price, even when the production remains the same.
Thus rise in nominal GDP does not indicate a rise in employment.
Thus Real GDP is better than the Nominal GDP to compare the GDP figures of different countries.
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