Let's dive into the definitions and real-life examples to understand their significance in economic decision-making.
1. Nominal Gross National Product: It is the total monetary value of all final goods and services produced by the residents of a country within a specific time period, usually a year, without adjusting for inflation. Real-Life Example: In a particular year, its Nominal GNP is calculated to be 500 crores. However, during the same year, the prices of goods and services across the country increased due to inflation by 5%. This means the Nominal GNP includes the effect of higher prices, which can distort the true picture of economic growth.
2. Real Gross National Product: It is the total monetary value of all final goods and services produced by the residents of a country within a specific time period, adjusted for inflation.
Real-Life Example: Let's assume the adjusted Real GNP is 475 crores. This figure accounts for the inflation effect and provides a more accurate representation of the country's economic growth, helping economists and policymakers assess the true changes in economic output.
