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Why is real GDP a more accurate measure of an economy's production than nominal GDP? Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes. Real GDP is not influenced by price changes, but nominal GDP is. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

Respuesta :

Answer:

Real GDP is not influenced by price changes, but nominal GDP is.

Explanation:

GDP is the total value of goods & services produced by an economy during a given year. It shows the level of economic activity in an economy.

Nominal GDP denotes the goods valued at current price. So, it changes due to change in output quantity, price change both. Hence it is not a good representative of Economic growth.

Real GDP denotes the goods valued at base year price. So, it changes only due to change in output quantity, not due to price change. Hence, it is a good representative of Economic growth.

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