Nominal Gross Domestic Product (GDP) is an essential economic indicator that reflects the total economic output of a country, valued at current market prices. It is widely used to gauge the state of a country’s economy and assess its growth. In this article, we will delve into the concept of nominal GDP, its differences from real GDP, and why it is considered a crucial economic indicator.
What is Nominal GDP?
Nominal GDP is a measure of the total value of goods and services produced in an economy over a particular period, typically a year. It is calculated by adding up the market value of all goods and services produced in the economy during that time. The market value of goods and services is determined by the current market prices.
Difference between Nominal and Real GDP
While nominal GDP measures the total output of an economy at current market prices, real GDP measures the total output of an economy adjusted for inflation. Real GDP takes into account the effect of changes in prices caused by inflation, thereby providing a more accurate picture of the economy’s growth.
