What is the defference between real GNP and Nominal GNP?
The nominal GNP is the value of all the production valued at this year’s prices. Real GNP is valued at prices of a base year. Thus, if an economy produces in year 1 2 oranges and 3 apples, at prices 5 and 6 respectively and in year 2, 4 oranges and 6 apples, at prices 9 and 8, then: nominal GDP year 1=2*5+3*6=28 nominal GDP year 2= 4*9+6*8=84 Notice that you can not compare production between two years because prices increased. It is not correct to state that production multiply by 3. So you should compute real GNP at prices of year 1 Real GDP year 1 (at prices of year 1) = 28 (same as before) Real GDP year 2 (at prices of year 1) = 4*5+6*6=56 So you are correct if you say that real GNP doubles Regards!
