Nominal & Real GDP (2 GDP Measures)
WHAT IS GDP? Gross domestic product (GDP) is the value of all final goods and services produced within a country in each year, i.e. the geographic area of the country. Nominal GDP vs Real GDP Introduction Understanding Nominal & Real GDP using Hypothetical Eample Let us assume Country A, which only produces Apple. Now, the GDP of the country would be the quantity of apple multiplied by the price of apple. Let us assume country A produces 100 apples in year 1. The selling price of 1 apple being rupees 10. As the country produces only apples and no other product, the GDP of the country would be: GDP (year 1) = Quantity of apple * price of apple = 100 * 10 = 1000 rupees In year 2, suppose country A produces 110 apples. The selling price of apple now is 12 rupees. GDP (year2) = 110 * 12 = 1320 rupees Now, what does 1320 indicates. Is this the nominal or the real GDP of the country? This is the nominal GDP of country A. Now, the increase in GDP from 1000 to 1320 is not just because of