What is the difference between real GDP and nominal GDP? Which is the better measure of economic well-being, and why?© BrainMass Inc. brainmass.com April 1, 2020, 9:08 pm ad1c9bdddf
Let me make this as simple as possible.
GDP stands for Gross Domestic Product, and does not count overseas investments (that would be Gross National Product).
Nominal versus Real:
Nominal GDP uses present-day prices. If inflation is pushing prices up, then this is counted in the nominal figure. But if the dollar is inflated in value, the nominal GDP would be a false reading. The dollar has lost value.
Real GDP tries to compensate for nominal 'false readings' by using a base year. That means it will use prices that were in effect in 2000 or something to have a measure from which to compare economic development in 2012. ...
The expert examines real GDP and nominal GDP differences.