Final answer:
Nominal GDP uses current prices, while real GDP uses constant prices. Changes in real GDP reflect changes in output, while changes in nominal GDP can be influenced by changes in prices. By adjusting for changes in prices, real GDP provides a more accurate measure of the actual level of output.
Step-by-step explanation:
Nominal GDP uses current prices, while real GDP uses constant prices. An increase in nominal GDP can be due to both changes in output and changes in prices. However, changes in real GDP only reflect changes in output, as it adjusts for changes in prices. Real GDP is a more accurate measurement of the actual level of output in a nation, as it removes the distorting effects of inflation or deflation.