Question

Distinguish between national income at current prices and national income at constant prices.

Answer 1

National Income at Current Price (Nominal GDP)	National Price at Constant Price (Real G
Under this GDP is calculated at current prices prevailing in the market for example if we measure India’s National Income of at 2011-12 at the same year’s prices than it is national income at the current price.	Under this GDP is calculated at a base year price. For example, if we measure India’s National income of 2009-10 at 2001-2002 prices than it is national income at a constant price.
This may give a misleading picture of the economic growth of a country because of an increase in National Income maybe because of the increase in price rather than any physical output goods and services.	On the other hand, this gives true picture of economic growth of a country as it is affected by the change in only the physical quantities.
National Income at current price = P1 × Q1 Where P1 = Current Price and Q1 = Current Quantity	National Income at Constant Price = P0 × Q1 Where P0 = Base year Price and Q1 = Current Quantity