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Economics · 2026 · 3 marks
National Income AccountingCircular Flow of Income and Methods of Calculating National Income3 marksUnderstandshort answer
CBSE 2026 · Region 1 · Set 2 · Q12
(A) Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India's National income.…
Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India's National income.
Harshit was of the view that it should be included, while Devanshi did not agree with him.
As their Economics teacher, guide them with correct treatment of the same with valid argument.
Meera and Shahid are two classmates, who were comparing India's economic growth over the years.
Meera referred to the increase in Gross Domestic Product (GDP) at current prices prevailing in market, while Sahid insisted on considering GDP after adjusting for inflation. Their debate on which of the two measures gives a true picture of people's well-being, remained inconclusive.
Considering the above mentioned situation, elaborate with valid reason, which of the two variables is considered a better indicator of welfare and why ?
Marking-scheme solution
Devanshi is correct. Prize money from lottery winnings should not be included in the estimation of National Income of India as it is a windfall gain. It is the income generated without rendering any productive service in return. National income includes only those incomes that arise from the production of goods and services.
Gross Domestic Product (GDP) after adjusting for inflation (Real GDP) is a better measure of welfare than GDP at current prices (Nominal GDP).
Real GDP is a true indicator of economic growth of a country as it changes only with the change in physical output. Thus, it eliminates the effect of changes in prices, showing the real growth of the economy.
In contrast, Nominal GDP might change with the change in output or/and change in prices.
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CBSE Class 12 Economics past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.