Question

Explain the difference between nominal and real gdp use a simplified numerical example with two differnt years to show your understanding

Answer 1

Real GDP is the gross domestic product and expressed in constant or unchanging prices that does adjust for inflation and is the best measure of economic growth. Where Nominal GDP is gross domestic product measured in current prices that does not account for inflation.

For example;

Year 2000

Nominal GDP = $100 million

Real GDP = $100 million

Year 2001

Nominal GDP = $110 million,

Real GDP = $105 million

Nominal GDP Growth Rate = 10% 
Real GDP Growth Rate = 5%