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

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Q: 49 (IAS/2000)
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

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,206,87,34,206,34,19

keywords: 

{'growth rate': [1, 1, 2, 2], 'capita income': [0, 1, 3, 4], 'growth': [1, 1, 1, 0], 'constant prices': [0, 1, 1, 3], 'wage rate': [0, 1, 0, 0], 'increase': [3, 1, 10, 35], 'current prices': [0, 1, 0, 2], 'price level': [0, 1, 0, 2], 'population': [3, 1, 2, 1], 'rate': [2, 3, 13, 20], 'money supply': [0, 0, 1, 3]}

The growth rate of per capita income at constant prices is lower than that of per capita income at current prices because the latter takes into account the increase in price level.

Per capita income at current prices is calculated by dividing the total income of a country by its population, without adjusting for changes in the price level. It reflects the nominal value of income in the given year.

On the other hand, per capita income at constant prices adjusts for changes in the price level by using a base year as a reference point. It reflects the real value of income by removing the effects of inflation or deflation.

When the growth rate of per capita income at current prices is higher than that of per capita income at constant prices, it means that the increase in income is partly or fully due to the rise in prices rather than an actual increase in real output or productivity.

Therefore, the statement is incorrect as the growth rate of per capita income at constant prices takes into account the increase in price level, not the rate of population growth, growth of money supply, or increase in the wage rate.

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