What is the difference between nominal and real GDP?
A) Nominal GDP values production at current prices, while real GDP values production at constant prices.
B) Nominal GDP values production at constant prices, while real GDP values production at current prices.
C) Nominal GDP values production at market prices, while real GDP values production at the cost of the resources used in the production process.
D) Nominal GDP consistently underestimates the value of production, while real GDP consistently overestimates the value of production.

Question

Quizplus · Accepted Answer

Nominal GDP values production at current prices, which means it includes the effects of inflation. Real GDP, on the other hand, values production at constant prices, meaning it removes the effects of inflation and provides a better indication of the actual growth in production.

What Is the Difference Between Nominal and Real GDP