Question

What is the difference between nominal GDP and real GDP?

1) Nominal GDP is measured in current dollars, while real GDP is measured in inflation-adjusted dollars.
2) Nominal GDP is measured in inflation-adjusted dollars, while real GDP is measured in current dollars.
3) Nominal GDP is the total value of all goods and services produced in a country, while real GDP is the value adjusted for inflation.
4) Nominal GDP is the value adjusted for inflation, while real GDP is the total value of all goods and services produced in a country.

Answer 1

Nominal GDP is measured in current dollars and represents the total value of goods and services produced, while real GDP is measured in inflation-adjusted dollars, taking into account changes in prices.

Step-by-step explanation:

The difference between nominal GDP and real GDP lies in the way they are measured and adjusted for inflation. Nominal GDP is measured in current dollars, representing the total value of all goods and services produced in a country without adjustments for inflation. On the other hand, real GDP is measured in inflation-adjusted dollars, taking into account changes in the overall level of prices over time.

For example, if a country's nominal GDP increases, it could be due to either an increase in the quantities of goods produced or a rise in the overall level of prices. By adjusting nominal GDP for inflation, we arrive at real GDP, which provides a more accurate measure of the actual level of output in a nation, accounting for changes in prices.