nominal or real GDP?

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nominal GDP: 

• value of output produced in current prices
• price X quantity 
• can increase from year to year if either output or prices increase 

real GDP: 

• Value of output produced in constant based year prices
• base price X current quantity
• Can increase from year to year if only output increases
• Adjusted for inflation

• In the base year the current price will always be equal to the constant price
• In years after the base year, nominal GDP will exceed real GDP
• In years before the base year, real GDP will exceed nominal GDP
• The base year is always the earliest year
• GDP deflator- Price index used to adjust from nominal to real GDP (100 X nominal GDP/real GDP) 
• In the base year, GDP deflator will always equal 100. 
• For years after the base year, GDP deflator or will be greater than 100 
• Four years before the base year GDP deflator will be less than 100 
• Consumer price index (CPI)- measures inflation by tracking changes in the price of a market basket of goods. (100 X price of market basket in the current year/price of the market basket of the base year)