Is it possible for nominal GDP to increase and real GDP to decrease in the same period?

Answer 1

Absolutely.

Nominal GDP is measuring the Consumption, Investment, and Government Spending in normal dollar terms.

Real GDP starts with the Nominal GDP number and then devides it by a 'deflator' that adjusts for inflation.

If inflation grows quickly enough, it is common for Nominal GDP to go up while the deflated Real GDP falls.

Answer 2

1. Difference between nominal and read:
Generally a real variable, such as the real interest rate, is one where the effects of inflation have been factored in. A nominal variable is one where the effects of inflation have not been accounted for:

GDP, or Gross Domestic Product is the value of all the goods and services produced in a country. The Nominal Gross Domestic Product measures the value of all the goods and services produced expressed in current prices. On the other hand, Real Gross Domestic Product measures the value of all the goods and services produced expressed in the prices of some base year. An example:
Suppose in the year 2000, the economy of a country produced $100 billion worth of goods and services based on year 2000 prices. Since we're using 2000 as a basis year, the nominal and real GDP are the same. In the year 2001, the economy produced $110B worth of goods and services based on year 2001 prices. Those same goods and services are instead valued at $105B if year 2000 prices are used. Then:

Year 2000 Nominal GDP = $100B, Real GDP = $100B
Year 2001 Nominal GDP = $110B, Real GDP = $105B
Nominal GDP Growth Rate = 10%
Real GDP Growth Rate = 5%

Once again, if inflation is positive, then the Nominal GDP and Nominal GDP Growth Rate will be less than their nominal counterparts. The difference between Nominal GDP and Real GDP is used to measure inflation in a statistic called The GDP Deflator

2. Relation between Real GDP and Nominal GDP
Nominal GDP is calculated using current prices whereas real GDP uses constant prices. The difference between the nominal GDP and real GDP is due to the inflation rate in market. The relationship between inflation, real GDP and nominal GDP is explained by Fisher Equation.


Real GDP = Nominal GDP - Inflation

3. Is it possible for nominal GDP to increase and real GDP to decrease in the same period?
=========== Y E S ===========

Answer 3

Absolutely. Nominal GDP - inflation = Real GDP.

So if inflation is running higher than nominal GDP, you have negative real GDP.

Answer 4

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