ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Nominal GDP includes both goods and services.

Detailed explanation-2: -Nominal GDP – the total value of all goods and services produced at current market prices. This includes all the changes in market prices during the current year due to inflation or deflation. Real GDP – the sum of all goods and services produced at constant prices.

Detailed explanation-3: -Nominal GDP reflects the raw numbers in current dollars unadjusted for inflation. Real GDP adjusts the numbers by fixing the currency value, thus eliminating any distortion caused by inflation or deflation.

Detailed explanation-4: -Governments use both nominal and real GDP as metrics for analyzing economic growth and purchasing power over time. This is done using the GDP price deflator (also called the implicit price deflator), which measures the changes in prices for all of the goods and services produced in an economy.

Detailed explanation-5: -There are generally two ways to calculate GDP: the expenditures approach and the income approach. Each of these approaches looks to best approximate the monetary value of all final goods and services produced in an economy over a set period (normally one year).