Nominal GDP is a measure of the Gross Domestic Product in absolute terms, while real GDP is a measure that factors in the rate of inflation.Know More
The inflation rate changes from year to year in most cases, so using real GDP is a good way to compare the GDP rates of different years. Economists use a metric called the GDP Deflator to determine the real GDP.
Economists use variables such as the GDP to measure the strength of the economy. When they need to compare the GDP rates of different periods, however, using this statistic has problems. This is because the prices for goods and services change over time.
If the GDP rates of growth for the years 1978 and 2008 are the same, for instance, this does not mean that the real value of all goods and services in the country were the same during both periods. Economists need to take the fact that the prices were higher in 2008 than in 1978 into account to compare the two years accurately.
Because prices for products and services tend to rise over time, the inflation rate is positive in most years. For this reason, nominal GDP rates are typically higher than real GDP rates.Learn more in Economics
GDP is important because it is a leading indicator of a country's economic health. It gives economists an idea of the nation's financial viability.Full Answer >
According to the World Bank, GDP per capita is equal to the GDP, or gross domestic product, of a country divided by the midyear population of the country. The gross domestic product of a country is the total value added by all the residents in the country in the last period plus any product taxes and minus any subsidies that are not included in the total value of the products.Full Answer >
There are many different things that affect the GDP, or gross domestic product, including interest rates, asset prices, wages, consumer confidence, infrastructure investment and even weather or political instability. All of the factors that affect GDP can be categorized as demand-side factors or supply-side factors.Full Answer >
Inflation generally increases when the gross domestic product (GDP) growth rate is above 2.5 percent due to several factors, such as demand for goods overstretching supply and higher wages in an ultra-competitive job market, according to Investopedia. When inflation starts to rise, consumers tend to spend more money before prices go higher.Full Answer >