Question

Why is real gdp a more accurate measure of an economy's production than nominal gdp?

Answer 1

Why is real GDP a more accuratemeasure of an economy's production than nominal GDP?

... Real GDP is not influenced by price changes, but nominal GDP is. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

Answer 2

Answer:

As real gdp is not influenced by the change in prices but nominal gdp is.

Explanation:

• As real GDP accounts for the picture of effects of inflation or deflation and hence gives a more accurate picture of the total value of goods and services produced in the economy.

• As nominal GDP measures the goods and services that are consumed in an economy it is thus adjusted to the effects of inflation and deflation. Thus real GDP is seen as an output of the production that may increase or decrease with the fluctuation of prices.

• Hence real GDP is basic indicator of the changes in the economy of production.