(i) Nominal GDP is the market value of all final goods ‘and services produced in a geographical region usually a country. On the other hand, Real GDP is a macroeconomic measure of the value of output, economically adjusted for price changes. The adjustment transforms the Nominal GDP into an index for quantity of total output.
(ii) Nominal values of GDP from different time periods can differ due to changes in quantities of goods and services and/or changes in general price levels. Values for Real GDP are adjusted for difference in price levels, while figures for Nominal GDP are not adjusted.
Real GDP is a better index of welfare of the people. When Real GDP rises, flow of goods and services tends to rise, other things remaining constant. This means greater availability of goods per person, implying higher level of welfare.
