macro fundamentals, GDP, investment & growth section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Answer: (a)

India's population growth rate is around 1 per cent annually. Real GDP and Real GNP growth have been more than 5 per cent in the last five years.

If GDP is represented by Y and population by P. Then per capita GDP is Y/P

suppose the growth in GDP is 5% i.e. Y to 1.05 Y

And the growth rate in the population is 1% P to 1.01 P So, the growth in per capita GDP (Y/P) will be 1.05Y/1.01P = 1.0396 Y/P

So, the growth in per capita GDP (Y/P) will be 3.96%

So, till the time growth in GDP (Y) is more than the growth in population (P), then per capita GDP will always increase. (In fact, our GDP/GNP has always increased more than 4% in the last 30 years). If the growth of population and growth of GDP is the same then per capita GDP growth will be zero.

Hence, Real per capita GDP and real per capita GNP has steadily increased in the last five years.

Answer: (a)

The GDP deflator is an index of price and measures the price changes quarterly.

GDP deflator = nominal GDP/real GDP

CPI and WPI indices are calculated by fixing the weights of different goods and services but in case of the GDP deflator, it varies as per actual production level.

(Its highly technical, if you don’t understand, leave it, will provide a video)

Answer: (a)

Marginal productivity of labour = $\text"Change in output"/\text"Change in labour"$

Marginal productivity of labour means how much extra production will increase by adding one extra labour.

When a factory is running at peak production, then its production cannot be increased even by adding more labourers. So, the marginal productivity of labour will be zero.

Answer: (d)