AP Dojo | Free Economics Study Resources

Nominal GDP uses current prices; real GDP uses base-year prices to measure actual output. GDP deflator = (Nominal GDP / Real GDP) × 100.

Ultimate Flashcard Review

Understanding the difference between real growth and inflation using the gradeflation analogy.

Which formula is used to calculate nominal GDP?

Current Output × Base Year Price Level

Current Output × Current Price Level

Base Year Output × Current Price Level

Current Output divided by the Inflation Rate

Year

Pizza (P)

Pizza (Q)

Soda (P)

Soda (Q)

Nominal GDP

2020

$10

10

$2

50

2021

$12

10

$3

60

2022

$15

20

$4

50

Apply what you've learned with these practice questions. These questions test your understanding of the key concepts.

📊
Nominal GDP = output × current prices; real GDP = output × base-year prices (removes price effects).
📈
GDP deflator = (Nominal / Real) × 100; use it to convert nominal to real: Real = Nominal / (Deflator/100).
✅
Growth rates: Use real GDP to compare output across years; nominal can be misleading when prices change.