The Gross Domestic Product (GDP) in Rupees grew at 7% during 2012-2013. For international comparison, the GDP is compare...

Question

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 7%  B. decreased by 13%  C. decreased by 10%  D. decreased by 11%

Accepted Answer

India's GDP in USD decreased by approximately 11% during 2012-2013. India's GDP in rupees grew by 7%, meaning if the 2012 GDP was Rs. X, then the 2013 GDP was Rs. 1.07X. To convert to USD, we divide by the exchange rate (rupees per USD). The exchange rate went from Rs. 50 per USD to Rs. 60 per USD, meaning each dollar now costs more rupees, so fewer USD are obtained for the same number of rupees. We compute the GDP in USD for both years and find the percentage change.