Question

Read the following statements—Assertion (A) and Reason (R). Choose one of the correct alternatives given below: 
Assertion (A): Real Gross Domestic Product is a better indicator of economic growth of a nation as compared to Nominal Gross Domestic Product.
Reason (R): Real Gross Domestic Product measures the value of goods and services at current year prices.
 

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

Real GDP reflects changes in output by holding prices constant, while Nominal GDP accounts for changes in both price and output.

Answer 1

The Correct Option is C

Assertion (A) is correct because Real GDP adjusts for inflation, making it a better measure of economic growth compared to Nominal GDP. However, Reason (R) is incorrect as Real GDP measures the value of goods and services at constant (base year) prices, not current year prices.