Which of the following state- ments is/are correct ? 1. If a country is experiencing increase in its per capita GDP, its GDP must neces- sarily be growing. 2. If a country is experiencing negative inflation, its GDP must be decreasing. Select the correct answer using the codes given below : Codes :

Statement 1 is incorrect because per capita GDP is the ratio of total GDP to the total population [1]. If a country's population decreases at a rate faster than its GDP declines, the per capita GDP will still show an increase despite a shrinking economy. Thus, rising per capita GDP does not necessarily imply a growing aggregate GDP. Statement 2 is incorrect because negative inflation (deflation) does not strictly mandate a decrease in GDP. While historical economic contractions often coincided with deflationary periods, it is theoretically and practically possible for an economy to experience 'good deflation' driven by technological advances or productivity gains that increase output while lowering prices [2]. Real GDP measures the volume of goods and services produced, and a decrease in the price level (negative inflation) does not automatically result in a reduction of this physical output.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.11 Macroeconomic Variables > p. 17
2. [2] https://www.investopedia.com/terms/p/per-capita-gdp.asp