The Gross Domestic Product (GDP) in Rupees grew at 7% during 2012-2013. For…
2014
The Gross Domestic Product (GDP) in Rupees grew at 7% during 2012-2013. For international comparison, the GDP is compared in US Dollars (USD) after conversion based on the market exchange rate. During the period 2012-2013 the exchange rate for the USD increased from Rs. 50/ USD to Rs. 60/ USD. India’s GDP in USD during the period 2012-2013
- A.
increased by 5 %
- B.
decreased by 13%
- C.
decreased by 20%
- D.
decreased by 11%
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Correct answer: D
Key idea: Value in US dollars = GDP in rupees ÷ exchange rate. Both the rupee growth and the exchange-rate change affect the USD value.
Let initial GDP be G rupees. Initial GDP in USD = G ÷ 50.
After 7% growth, GDP in rupees = 1.07 x G. Converted to USD at the new rate, new USD = 1.07 x G ÷ 60.
Ratio of new USD to initial USD = (1.07 x G/60) ÷ (G/50) = 1.07 x (50/60) = 1.07 X 5/6 ≈ 0.8916667.
Percent change = (0.8916667 − 1) × 100% ≈ −10.833%.
Conclusion: India’s GDP in USD decreased by about 10.83%, which is approximately a 11% decrease when rounded.