If the Real Gross Domestic Product is Rs. 16,000 crores and Gross Domestic Product at current prices is Rs. 20,000 crores, calculate the value of price index. Giving valid reasons, classify the following into stock and flow variables : (i) Production of wheat during the year 2020 – 21 (ii) National Income of Indian Economy during the financial year 2020 – 21

Question

Accepted Answer

Given: Real GDP = Rs. 16,000 crores, Nominal GDP = Rs. 20,000 crores

Price Index (GDP Deflator) = (Nominal GDP / Real GDP) x 100
= (20,000 / 16,000) x 100
= 125

Stock vs Flow: Stock is measured at a point in time (e.g., wealth, capital, debt). Flow is measured over a period of time (e.g., income, savings, investment). For example, money in a bank account at a given date is a stock, while interest earned per year is a flow.