Nominal and Real GDP I 60 Second Economics

Added: 2026-05-17

[00:00:00]60-second economics on the key difference between nominal and real GDP.

[00:00:05]Now, nominal or money GDP is the total value of goods and services produced at current market prices. It does not account for inflation or deflation and uses prices that are current in the year the output is produced or the goods or services are supplied. Whereas real GDP, shown here in the UK chart, is the total value or volume of output produced adjusted for changes in prices. It uses a base year to keep prices constant and tells us whether the economy is growing or contracting in real terms. Now, to get from nominal to real, we use a price index.

[00:00:43]Technically, it's called the GDP deflator, and this deflates the money or nominal value of a of GDP using a price index. The formula is real GDP equals nominal GDP * 100 / the price deflator.

[00:01:01]Let's say that nominal GDP in country A was 3,000 billion in 2024, but rose by 10% to 3,300 in 2025, a nominal increase of 10%, but prices increased by 6%.

[00:01:15]So, the price index goes up from 100 to to 106.

[00:01:19]Therefore, real GDP is 3,300 * 100 / 106, which comes to 3,113 billion pounds or dollars.