Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must always be higher than real GDP.  Do you agree or disagree?  Why? 

Expert Answers
gsenviro eNotes educator| Certified Educator

More accurately, the real GDP is the value of all the goods and services adjusted for inflation or deflation between different years, whereas the nominal GDP is just the value of goods and services generated in a country in a given year.

In case of inflation, the real GDP is less than the nominal GDP, whereas in case of deflation (a fall in prices), the real GDP will be more than the nominal GDP.

The real and nominal GDPs are related by the GDP deflator, which is given as the ratio of the two,

or, GDP deflator = (nominal GDP/ real GDP) x 100.

A value of 100 will mean no change in price level.

A value greater than 100 will mean inflation, and a value less than 100 will mean deflation.

In general, a country usually witnesses inflation or a rise in prices. The exception to this or deflation is seen in times of economic recession, as observed in the US in 2009-10.

Hope this helps. 

For more information on the differences between nominal and real GDP, check out this video: 

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