Real VS Nominal GDP

Real   Value of output produced IN CONSTANT OR BASE YEAR PRICES   Can increase from year to year; only if output increases   Used to calculate economic growth   *Real= P(current)•Q(current) Nominal   Value of output produced IN CURRENT PRICES   Can increase from year to year; if either output or prices increase   Used to calculate inflation   *Nominal= P(base)•Q(current) GDP Deflator    Base year GDP Deflator is 100    Years after base year, GDP Deflator greater than 100    Years before base year, less than 100    * (Nominal GDP)                                •100       (Real GDP)