Question

1. On the basis of the following hypothetical data: (all figures in ₹ crore)
   

   Year	Nominal GDP	Nominal GDP adjusted to base year prices
   2020	3,000	4,000
   2023	4,000	4,500

   Calculate the percentage change in Real Gross Domestic Product in the year 2023 using 2020 as the base year.
2. “The public investment on the construction of a multi-lane flyover may reduce traffic congestion.”
   On the basis of the above statement, discuss its likely impact on Gross Domestic Product (GDP) and welfare in an economy.

Answer 1

1. Percentage change in Real GDP = `"Change in Real GDP"/"Real GDP" × 100`
   `(4,500 - 4,000)/(4,000)xx100`
   = 12.5 %
2. The public investment on the construction of a multi-lane flyover may impact the Gross Domestic Product (GDP) positively as good quality infrastructure (like an effective transport system) generally attracts higher investments in an economy and may lead to an increase in employment opportunities. It may also lead to a reduction in travel time and lower average transportation costs. Consequently, it may increase the well-being of citizens.