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Differentiatebetween National Income at Current Prices and NationalIncome at ConstantPrices. Which of the two presents a better view of the economic growth of economyand why ? |
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Answer» Solution : National income at constant prices `= ("National income at CURRENT prices")/(" Price index of current YEAR")xx"Price index of base year (100) "` National income at constant prices REFLECTS the REAL growth of an economy because it increases onlywhen there is an increase inquantities of PHYSICAL goods andservices. National income at current prices may increase due toincrease in both price as well as quantities of goods and services during the year and thus it does not reflect the truepicture of economic growth. Only increase in physical goodsand services increase the availabilityof goods and services to people and raisinggeneral standard of living. |
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