Homework Help

The increase in GDP of India is 4.8% and inflation is at 7%. What does this say about...

user profile pic

econkid3 | Student | eNotes Newbie

Posted June 7, 2013 at 5:42 AM via web

dislike 1 like

The increase in GDP of India is 4.8% and inflation is at 7%. What does this say about the economy.

1 Answer | Add Yours

user profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted June 7, 2013 at 6:02 AM (Answer #1)

dislike 1 like

GDP or gross domestic product is the total value of all goods and services produced in the economy. Usually the term GDP refers to nominal gross domestic product, the qualifier nominal is used to indicate that the current price of goods and services has been considered in estimating the total value.

The information provided in the question gives the increase in GDP at 4.8% while the inflation is at 7%. Inflation is the increase in price of goods and services. As this is at 7%, anything that cost 100 at the start of the year now costs 107. The GDP growth rate is 4.8%.

As the GDP growth rate is the increase in the value of of goods and services at the current market price, the fact that GDP growth rate is at 4.8% while inflation is at 7% indicates that the there is a contraction in the economy. Over the last year, the goods and services produced in the economy has not increased, rather it has decreased. The actual growth of the economy is negative, which is a very bad sign. It indicates that industries are producing less now than what they were in the previous year, an increase in unemployment and a decrease in the actual wages of people in India.

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes