Nominal and Real GDP

Gross Domestic Product (GDP) defines the economic worth of products and services manufactured in a country in a definite financial year. It also accounts for the revenue received by foreign citizens locally and the insufficient income earned by country’s residents abroad. Whenever the measurement of GDP is at current values, it represents nominal GDP and the real GDP is evaluated at fixed prices.

Both the GDP are financial tools for estimating a nation’s economic development and growth. However, there is still confusion on which GDP indicates the nation’s development better. This article will explain what the variations between nominal and real GDP are.

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Nominal GDP Meaning

Nominal Gross Domestic Product is GDP evaluated at present market prices. GDP is the financial equivalent of all the complete products and services generated within a nation’s in a definite time. Nominal varies from real GDP, and it incorporates changes in cost prices due to an increase in the complete cost price. Generally, economists utilize a gross domestic factor to change nominal GDP to real GDP also known as current dollar GDP or chained dollar GDP.

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Real GDP Meaning

Real GDP is an inflation-adjusted calculation that analyzes the rate of all commodities and services manufactured in a country for a fixed year. It is expressed in foundation year prices and is referred to as a fixed cost price. Inflation rectified GDP or fixed dollar GDP. Real GDP is regarded as a reliable indicator of a nation’s economic growth as it solely only considers production and free from currency fluctuations.

Real GDP is regarded as a reliable indicator of a nation’s economic growth as it solely only considers production and free from currency fluctuations.

This article is ready to reckoner for all the students to learn the difference between Nominal and Real GDP.

Basis Nominal GDP Real GDP
Meaning The aggregate financial business value manufactured within a country is known as Nominal GDP The measure of GDP modified according to the changes in the general price level
What is it? Inflation without GDP GDP Inflation-adjusted
Communicated in Present year prices Beginning year prices or regular prices
Worth High Low
Uses Compares different quarters of a particular year Compares two or more financial year
Financial Growth Analyzing is not easy Measures economic growth in an excellent manner

The above-mentioned concept explains what is Nominal and Real GDP. To know more, stay tuned to BYJUS.

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