Nominal GDP
Nominal GDP measures gross domestic product using current-year prices. It grows whenever prices increase (inflation) or output increases, so it is not a pure measure of output growth. Nominal GDP must be adjusted for inflation to determine real growth.
Real World
Zimbabwe's nominal GDP soared during its 2008 hyperinflation, with figures in the trillions of Zimbabwean dollars, yet real output collapsed as farms and factories shut down and unemployment exceeded 80%.
Exam Focus
If a question quotes GDP growth without specifying 'real', challenge the figure by explaining it may simply reflect rising prices.
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