Different betwen GDP nominal and Real

 Different betwen GDP nominal and Real

The value of final goods and services measured at current prices is called nominal GDP. It can change over time, either because there is a change in the amount (real value) of goods and services or a change in the prices of those goods and services.

Hence, nominal GDP Y = P * y, where P is the price level and y is real output—and remember we use output and GDP interchangeably.

Real GDP or, y = Y : P is the value of goods and services measured using a constant set of prices.
This distinction between real and nominal can also be applied to other monetary values, like wages. Nominal (or money) wages can be denoted by W and decomposed into a real value (w) and a price variable (P).

Hence, W = nominal wage = P • w
\t w = real wage = w/P
This conversion from nominal to real units allows us to eliminate the problems created by having a measuring stick (dollar value) that essentially changes length over time, as the price level changes.