How are nominal GDP and real GDP related?
A) Nominal GDP measures base-year production using base-year prices, while real GDP measures current production using current prices.
B) Nominal GDP measures current production using base-year prices, while real GDP measures current production using current prices.
C) Nominal GDP measures current production using current prices, while real GDP measures current production using base-year prices.
D) Nominal GDP measures current production using current prices, while real GDP measures base-year production using base-year prices.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated using the current year's prices, which can be affected by inflation or deflation, making it a measure of the current economic output at current prices. Real GDP, on the other hand, is calculated using the prices of a base year, which allows for the measurement of economic output adjusted for price changes, providing a more accurate reflection of an economy's size and how it's growing over time.

How Are Nominal GDP and Real GDP Related