Nominal GDP vs. Real GDP

Nominal GDP (Inflation)	Real GDP (Economic Growth)
Value of output produced in prices.	Value of output produced in constant or base year prices.
Can increase from year to year, if either output or prices increases.	Can be increase from year to year, only if output increases.
Formula : P x Q	Formula : P x Q

Ex. : Determine nominal GDP in Year 4, using the following info:
   In Year 1, the base year, 10 computers sold @ $2,000 each and 15 televisions sold @ $500 each. In Year 4, 17 computers sold @ $2,200 each and 20 televisions sold @ $550 each. 

	Computers	Televisions
Year 1 (Base Year)	10 for $2,000 = $20,000	15 for $500 = $7,500
Year 4	17 for $2,200 = $37,4000	20 for $550 = $11,000

	Real GDP	Nominal GDP
Year 1 (Base Year)	----------------	----------------
Year 4	$2,000(17) + $500(20) = $44,000	$37,400 + $11,000 = $48,400

GDP Deflator

• Formula : (Nominal GDP / Real GDP) x 100 
• In base year, the GDP Deflator = 100.
• Years after the base year, the GDP Deflator > 100.
• Years before the base year, the GDP Deflator < 100.

More Informations and Example in this video.