Why is real GDP considered a better measure of economic growth than nominal GDP?

Economics Real Vs Nominal Gdp Questions



80 Short 61 Medium 45 Long Answer Questions Question Index

Why is real GDP considered a better measure of economic growth than nominal GDP?

Real GDP is considered a better measure of economic growth than nominal GDP because it takes into account changes in the price level over time. Nominal GDP only measures the total value of goods and services produced in an economy without adjusting for inflation or deflation. Real GDP, on the other hand, adjusts for changes in prices by using a constant base year, allowing for a more accurate comparison of economic growth over time. By removing the effects of inflation, real GDP provides a clearer picture of the actual increase in production and standard of living in an economy.