Question

1)

a) What is the definition of nominal GDP ?

b) What is the definition of real GDP ?

c) Between nominal GDP and real GDP which one is better ?

Answer 1

A) Nominal GDP is GDP measured in current prices. It Measures the value of goods produced in the economy valued at current market prices.It does not account for inflation from year to year.

B) real GDP is GDP measured in constant prices. It Measures the value of goods produced in the economy valued at base market prices It is adjusted for inflation

C) real GDP is a better measure because it is corrected for inflation.  Nominal GDP can increase if output or price increases but Real GDP increases only if output increases .