~ Nominal and Real GDP ~

 GDP is the value of all finals goods and services produced.

 Nominal GDP measures these values using current prices.
 Changes in nominal GDP can be due to:
a. Changes in prices.
b. Changes in quantities of output produced.
 Real GDP measures these values using the prices of a base year.
 Real GDP controls for inflation.
 Changes in real GDP can only be due to changes in quatities, because real GDP is
constructed using constant base-year prices.

GDP Deflator

 The Deflator is the nominal GDP multiplied by a hundred and divided by the real GDP.
As nominal and real GDP are the same in the base year, the deflator is always 100 in the
base year. For any other year, the deflator states the price level for that year as a
percentage of the prices in the base year.
 The inflation rate is the percentage increase in the overall level of prices.
 One measure of the price level is the GDP deflator, defined as :

Nominal GDP
GDP Deflator = 100 ×
Real GDP