Nominal GDP

Nominal GDP

Gross domestic product without or before accounting for inflation. Comparing nominal GDPs from year to year shows the amount an economy has grown or shrunk in dollar amounts, but does not show how the buying power of those dollars has been affected. Real GDP accounts for inflation. For example, if the nominal GDP has grown 10% and the inflation rate is 3%, the real GDP growth is 7%.

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Nominal GDP

What Does Nominal GDP Mean?

A gross domestic product (GDP) figure that has not been adjusted for inflation. Also known as current dollar GDP or chained dollar GDP.

Investopedia explains Nominal GDP

Any GDP figure that does not account for inflation can be misleading because GDP will appear higher than it actually is. The same concept that applies to return on investment (ROI) applies here. If a person has a 10% ROI and inflation for the year has been 3%, that person's real rate of return will be 7%. Similarly, if the nominal GDP figure has shot up 8% but inflation has been 4%, the real GDP has increased only 4%.

Related Terms:
• Consumer Price Index—CPI
• Gross Domestic Product—GDP
• Inflation
• Market Economy
• Real Gross Domestic Product