Term |
Definition |
What it Measures |
Inflation Adjustment |
Why it is Useful |
GDP |
Gross Domestic Product is the total value of all goods and services produced in a country during a specific period. |
It measures the overall economic output of a country. |
It can be calculated with or without adjusting for inflation. |
It helps understand the overall size and performance of a country's economy. |
Nominal GDP |
Nominal GDP is the value of all goods and services produced at current market prices in a given year. |
It measures the economic output using current prices. |
It is not adjusted for inflation. |
It shows the present size of the economy but can be influenced by changes in price levels. |
Per Capita GDP |
Per Capita GDP is the Gross Domestic Product divided by the total population of the country. |
It measures the average economic output or income per person. |
It is often adjusted for inflation and cost of living. |
It helps compare living standards and income levels across countries or over time. |
What is Purchasing Power Parity (PPP)?
|
Ensure IAS Mains Question: Q. “Nominal GDP alone cannot fully reflect the economic welfare of a country.” Explain this statement with reference to the concepts of Nominal GDP, Real GDP, and Purchasing Power Parity (PPP). Discuss their relevance in comparing economies. (Answer in 250 words) |
Ensure IAS MCQ:
How many of the above statements is/are correct? Ans: B Exp:
Thus, option B is correct. |
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