Multiple choice

National income on current prices is higher than that at constant prices because

  1. price increase is lower than increase in production.

  2. price increase is equal to increase in production.

  3. price increase is higher than increase in production.

  4. decrease in production.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

National income on current prices is higher than that at constant prices because price increase is higher than increase in production. When the value of goods and services is found out by multiplying the quantity produced during one year by the prices prevailing in that year, we call it National income at Current Prices. On the other hand, when the value of goods and services is calculated by multiplying the quantity during one year with prices of the base year, we call it National Income at Constant Prices. 

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