THE EXAMS POINTNominal values versus real values
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Nominal values versus real values
01 · Nominal GDP
Values final output using current-period prices.
02 · Real GDP
Measures output using a constant-price or equivalent volume framework.
03 · GDP deflator
Nominal GDP ÷ real GDP × 100 when both are expressed on a compatible basis.
04 · Inflation
A sustained increase in the general price level; it differs from output growth.
Connect the branches
A rise in nominal GDP can reflect prices, quantities or both.
Avoid the exam trap
A falling inflation rate can still mean prices are rising, just more slowly.
Test yourself: Does lower inflation necessarily mean lower prices?
No. A lower positive inflation rate means slower price increases. Falling general prices would be deflation.
A concise revision aid with simplified connections. It supports the full chapter and primary references; it does not replace them.