Difference between real and nominal GDP - Economics - National Income Accounting

Question

Difference between real and nominal GDP ?

Amit Chatterjee · Accepted Answer

Basis of Difference

Real 
GDP

Nominal 
GDP

1 Definition

It refers to the total market value of the output at the base
year prices

It refers to the total market value of the output at the current
year prices

2 Changes

Its value can change only when the volume/quantity
of output changes overtime

Its value can change only with change in the
prices overtime

3 Indication

It can be treated
as an index of economic growth i e higher Real GDP
indicates higher economic growth

It cannot
be treated as an index of economic growth i e higher Nominal
GDP
does not implies higher economic growth, in fact, it indicates
inflation

Basis of Difference	Real GDP	Nominal GDP
1. Definition	It refers to the total market value of the output at the base year prices.	It refers to the total market value of the output at the current year prices.
2. Changes	Its value can change only when the volume/quantity of output changes overtime.	Its value can change only with *change in the prices* overtime.
3. Indication	It can be treated as an index of economic growth i.e. higher Real GDP indicates higher economic growth.	It cannot be treated as an index of economic growth i.e. higher Nominal GDP does not implies higher economic growth, in fact, it indicates inflation.