Difference between real and nominal GDP ?

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.

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