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    What is nominal GDP? What is real GDP? What is included in each? Why are these measures important? What do they tell us? What was GDP for the last two years (taken from the BEA)?

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    Nominal and Real GDP:

    Gross domestic product is the sum of values of goods and services produced over a certain period of time by a region mostly a country (Gross Domestic, 2010). It is used to indicate products and services generated from a specific territory and do not include income received over the period. Gross domestic product can be used to determine a country's national income and also its economic output.

    The difference between nominal GDP and real GDP is that nominal GDP considers the total amount of money used on gross domestic product while real GDP does not factor in effects of inflation when determining gross domestic product (Gross Domestic, 2010). Values provided in nominal GDP are expressed in current market prices while values in real GDP eliminate changes in price due to deflation or inflation by using prices of some base year.

    Factors of GDP:
    Personal consumption:

    The first component of gross domestic product is personal consumption which consists of household purchases involving durable and non durable goods and services. Factors of GDP (2011) provide that personal consumption expenditure is the highest component of gross ...

    Solution Summary

    Nominal and Real GDP are clarified in this solution.