UPSC Prelims 2000 · General Studies
Question 49: Economy and Social Development
The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because the latter takes into account the rate of
AnswerThe answer is (b).
Per capita income at current prices is measured at the prices of the year itself, so it includes the rise in prices as well as real growth. Per capita income at constant prices values output at base-year prices, which removes the effect of the price level. So the current-price figure grows faster whenever prices rise, and the gap reflects the increase in the price level.
Why each option is right or wrong
- (a) Population growth affects both figures equally, since both are per head.
- (b) Right: constant-price income allows for the rise in the price level.
- (c) Money supply growth is not the adjustment made in constant-price measures.
- (d) The wage rate is not the adjustment made in constant-price measures.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2000, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.