3 Tutorials that teach Nominal GDP versus Real GDP
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Nominal GDP versus Real GDP

Nominal GDP versus Real GDP

Author: Colton Cranston
This lesson covers nominal GDP versus real GDP.
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Notes on "Nominal GDP verse Real GDP"

Key Terms

  • GDP
  • Gross Domestic Product; the sum of all final goods and services sold within a nation’s domestic borders; a measurement of economic activity
  • Nominal GDP
  • The value of GDP including the impact of inflation
  • Real GDP
  • Adjusts for inflation by restating nominal GDP in reference to a base year dollar value.
  • Interest Rate Effect
  • As interest rates fall, consumption increases due to the decrease in the cost of borrowing; as a result, purchases and business investment (Consumption, C, and investment, I, respectively) both increase.
  • Price
  • The cost of a good or service; nominal prices reflect the current or prevailing price for an item; real prices adjust for purchasing power variation over time (inflation).
  • Nominal
  • The value of an economic variable such as GDP, inflation, or prices in the current period, does not reflect changes in purchasing power (price level) over time.
  • Real
  • The value of an economic variable such as GDP, inflation, or prices in the current period, adjusted for the change in purchasing power (price level) over time.