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What is the difference real GDP and nominal GDP?

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What is the difference real GDP and nominal GDP?
posted Mar 8, 2016 by anonymous

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Nominal GDP
Nominal GDP is the market value (money-value) of all final goods and services produced in a geographical region, usually a country.

Real GDP
Real GDP is a macroeconomic measure of the value of output economy, adjusted for price changes. The adjustment transforms the nominal GDP into an index for quantity of total output.

Lets understand this difference with an example
Say all goods and services created in a country for one year is worth $100 in year A. In the Year A+1 the value of goods and services produced is $110 but real increment is only about 5% (remaining 5% increment came because of the value of same goods and services increased because of the inflation). Then nominal GDP is $110 but real GDP (assuming base year as A) is $105.

answer Mar 8, 2016 by Vishi Gulati