Real GDP and nominal GDP differ because the real GDP:

Question

is adjusted for changes in the volume of intermediate transactions.


includes the economic effects of international trade.


has been adjusted for changes in the price level.


excludes depreciation charges.

Answer 1

Real GDP differs from nominal GDP primarily because real GDP:

has been adjusted for changes in the price level.

This means that real GDP accounts for inflation or deflation and reflects the true value of goods and services produced in an economy, while nominal GDP does not adjust for price changes and represents the value at current market prices.