Discuss briefly the problem of 'Double Counting', using a suitable example. Distinguish between Real Gross Domestic Product and Nominal Gross Domestic Product, using a suitable numerical example.

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Double counting arises when value of intermediate goods is included along with value of final goods, leading to overestimation. For example, a farmer sells wheat for Rs. 500 to a miller, who sells flour for Rs. 700 to a baker, who sells bread for Rs. 1,000. If we add Rs. 500 + Rs. 700 + Rs. 1,000 = Rs. 2,200, wheat and flour are counted twice. The correct value is either the final output (Rs. 1,000) or sum of value added (500 + 200 + 300 = Rs. 1,000).

Real GDP is GDP estimated at base year prices, affected only by change in quantity. Nominal GDP is GDP estimated at current year prices, affected by both price and quantity changes. For example, if output rises 10% but prices rise 20%, Nominal GDP rises 32% while Real GDP rises only 10%. Real GDP is the better measure of economic growth.