what is nominal gross domestic product gdp 
nominal gross domestic product gdp is gdp evaluated at current market prices it is the total value of all goods and services produced in a given time period less the value of those made during the production process understanding nominal gdpthe economy is a series of interrelated processes that determine how resources are allocated these processes include the production distribution and consumption of goods and services along with other activities these goods and services are required by those living within the economy there are many ways to determine and measure how well the economy is doing economists watch various economic indicators such as unemployment inflation retail sales industrial production and gross domestic product gdp is a metric that measures the health and well being of a nation s economy it s the total value of all goods and services that are produced during a certain period of time less the value of those that are employed during the production process there are different types of gdp including real actual potential and nominal nominal gdp is an assessment of economic production in an economy that includes current prices in its calculation in other words it doesn t strip out inflation or the pace of rising prices which can inflate the growth figure all goods and services counted in nominal gdp are valued at the prices that are actually sold that year the bureau of economic analysis bea measures and reports gdp figures in the united states nominal gdp formulanominal gdp is the total value of goods and services produced within a specific economy there are actually a couple of ways that you can use to calculate nominal gdp the first is the expenditure approach in order to use this method you ll have to know a few values including once you have these figures you can plug them into the following formula you can also use the gdp price deflator method to calculate nominal gdp this approach involves the use of the following formula economists use the prices of goods from a base year as a reference point when comparing gdp from one year to another this price difference is called the gdp price deflator components of nominal gdplet s dive into the four main components of nominal gdp first consumption represents the total expenditure by households on goods and services this includes everything from groceries and clothing to healthcare services and entertainment it s the demand side of the economy and consumer spending patterns can be influenced by things like disposable income and cultural trends investment encompasses spending on capital goods such as machinery equipment and infrastructure when a country spends on investment it has the aim of increasing future production capacity investment also includes expenditures on research and development government spending refers to the expenditure by governments on goods and services this can range from public education and healthcare to defense and infrastructure projects while government spending contributes directly to nominal gdp its impact on the economy can vary depending on the nature of the expenditure for instance investments in education and infrastructure can boost productivity while excessive spending on subsidies or bureaucracy may actually lead to economic inefficiencies if innovators no longer have incentives to innovate last the difference between a country s exports and imports is called net imports when exports exceed imports a country has a trade surplus conversely when imports exceed exports it has a trade deficit net exports reflect a country s competitiveness in international markets as how well a country may leverage global markets for expansion effects of inflation on nominal gdpbecause it is measured in current prices growing nominal gdp from year to year might reflect a rise in prices as opposed to growth in the number of goods and services produced if all prices rise more or less together known as inflation then this will make nominal gdp appear greater inflation is a negative force for economic participants because it diminishes the purchasing power of income and savings both for consumers and investors inflation is most commonly measured using the consumer price index cpi or the producer price index ppi the cpi measures price changes from the buyer s perspective or how they impact the consumer 1 the ppi on the other hand measures the average change in selling prices that are paid to producers in the economy 2