Question

I need to write an essay about 200 words in Contrast to nominal GDP and real GDP. Why is one more reliable than the other for comparing changes in the standard of living over a series of years? What is the GDP price index, and what is its role in differentiating nominal GDP and real GDP?

please no handwriting.

Answer 1

Nominal GDP is the total market value of all goods and service produce in a country over a period.Nominal gdp never adjusted to account for price changes from inflation and deflation. It means that it rises and falls with change in price and economic output in a economy.Real GDP is also used to measure the economic activity but there are some differences. Nominal GDP is a economic measure that doesnt account for changes in price level. The real GDP is affected by inflation or deflation. Therefore there will be a change in the price.Real GDP uses the price in the base level. So that the economists will get a clear idea about the economy. Nominal GDP is much higher than Real GDP. Nominal GDP is very easy to calculate whereas Real GDP is little complex.Most of cases Real GDP is used as the indicators because it is more accurate. We can compare the result from the past financial year's Real GDP. GDP deflator is calculated by the formulae, (Nominal GDP/ Real GDP)*100 . It is the inflation of the country. Nomial GDP is poorer than the Real GDP. The gross domestic product is the aggregate of all the values of the goods and services produced in a country during ine year.The main difference is that real values are adjustes for inflation, while nominal are not.The GDP price index is an indicators for the inflation calculated by the comparing the current GDP to GDP in reference year.GDP price index is the measure of inflation in the price of goods and services produced in the country.It includes the price of goods and serice that export to other country.