Nominal GDP vs. Real GDP | How to Calculate Nominal & Real GDP - Principles of Macro | Intro to Econ

What is the difference between nominal GDP and real GDP, and how are they calculated? In this video, I explain the difference between nominal and real GDP and work through calculations to show how each is measured. We look at how changes in prices and quantities affect nominal GDP, how using base-year prices allows us to calculate real GDP, and why real GDP provides a better measure of changes in economic production over time. I also compare the growth rates of nominal and real GDP and show how the difference between nominal GDP growth and real GDP growth reflects inflation (approximately). Topics covered: • Nominal GDP • Real GDP • How to calculate nominal GDP • How to calculate real GDP • Base-year prices and quantities • Nominal GDP vs. real GDP • Nominal GDP growth vs. real GDP growth • The relationship between GDP growth and inflation • Why economists use real GDP to measure economic growth This video is part of my Principles of Macroeconomics series and is designed for students taking an introductory college-level macroeconomics course.