Identify the correct combination of List A and List B:
 

List A	List B
A. Nominal GDP	I. Currency notes, coins and demand deposits held by the public in commercial banks
B. Real GDP	II. GDP evaluated at constant prices
C. Fiat money	III. Money with no intrinsic value
D. Narrow money	IV. GDP evaluated at current market prices

The correct answer is A-IV, B-II, C-III, D-I.

Key Points

• Nominal GDP is evaluated at current market prices, reflecting the prices of goods and services in the year they are produced (A-IV).
• Real GDP is evaluated at constant prices, adjusting for inflation and providing a more accurate reflection of an economy's size and how it's growing over time (B-II).
• Fiat money is currency that has no intrinsic value and is not backed by a physical commodity but is made legal tender by government decree (C-III).
• Narrow money includes currency notes, coins, and demand deposits held by the public in commercial banks (D-I).

Additional Information

• GDP (Gross Domestic Product):
  • GDP is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
  • It serves as a comprehensive scorecard of a given country’s economic health.
• Inflation:
  • Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
  • Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
• Intrinsic Value:
  • Intrinsic value is the perceived or calculated true value of an asset, investment, or company.
  • In the context of fiat money, intrinsic value refers to the actual value of the material from which the money is made, which is typically negligible.
• Demand Deposits:
  • Demand deposits are funds held in bank accounts from which deposited money can be withdrawn at any time without any notice to the depository institution.
  • Examples include checking accounts and savings accounts.