Question

What are the differences between real GDP and the nominal GDP?

Answer 1

REAL GDP:

1) The real GDP total value of all the final goods and services that an economy generated in a particular year.

2) Generally, it is found out or calculated depending upon the prices of a selected Base year.

3) Real GDP output doesn't change eventhough the output changes.

4) Real GDP thus accounts for the inflation and deflation.

NOMINAL GDP:

1) The nominal GDP is the value of all the final goods and servies that an economy produced during a given year.

2) Nominal GDP is calculated by using the prices that are current in the year in which the output is generated.

3) Eventhough the output remains constant, the nominal GDP will change.

4) Generally nominal GDP is expressed in the monetary terms.