HPAS/ N.T. Allied Mains 2022-23 Answer Writing Challenge: Model Answer

Question: What is Nominal GDP?  List out its significance.  (4 marks, 60 words)

Answer: 

INTRO

• Nominal GDP is nothing but the total market value of all the goods and services produced in India in a financial year.
• Nominal GDP is calculated at current market prices, for the year the GDP is being calculated.
• The real GDP is “derived” from the nominal GDP by removing the effect of inflation.

The significance of Nominal GDP:

• For preparing the budget, it is the nominal GDP that matters
• Once the government knows the nominal GDP of the current financial year, it uses this number to project the likely nominal GDP in the next financial year (in this case, 2023-24) for which the budget is being made.
• It is useful for making comparisons across different quarters in a financial year