Question

Explain the similarities and difference between real and nominal GDP. Under what circumstances would you use Real GDP? When would you use Nominal GDP? Your answer should take approximately 1 page

Answer 1

Nominal GDP and Real GDP both calculate the output of the economy. Nominal GDP and Real GDP both are calculated using prices and quantity in the economy. Nominal GDP is usually higher than Real GDP because Real GDP is adjusted to inflation where Nominal GDP is not adjusted to inflation.

While calculating Nominal GDP we use current price and wuquanti prevailing in the economy where as while calculating real GDP we use current quantity and base price.

Nominal GDP is mostly used to find the national economic output in a particular period. So Nominal GDP is used to track the Economic output prevailing in the country in current period.

Real GDP is used to find the economic growth in a country as it is adjusted with the inflation level that is prevailing in the country. So any growth Real GDP tells that there is a growth in the economy of the country.