Capturing business cyclical swings

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The current forecasts for the growth rates of gross domestic product are, expectedly, quite grim. The real GDP is estimated to contract by 7.7 per cent in 2020-21 compared to a positive growth of 4.2 per cent in 2019-20. The nominal GDP is also expected to shrink by 4.2 per cent this fiscal. The contraction in both real and nominal GDP is unprecedented in India's history. It has never happened before, even though the economy has experienced many shocks and slowdowns in the past 73 years. Part of this can certainly be attributed to the pandemic. However, the policy response to the pandemic in terms of a strict and sudden lockdown has much to do with the magnitude of the contraction.

Nominal GDP growth does a better job than real GDP growth in capturing business cyclical swings (phases of business cycles contraction, expansion etc.) Real growth is more likely to be smoothed." Do you agree with the statement? Explain your stand with reason

Reference no: EM132790263

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