Final answer:
Nominal GDP is unadjusted for inflation, while real GDP accounts for inflation, providing a more accurate reflection of an economy's output.
Explanation:
Nominal GDP is the value of goods and services produced in an economy without adjusting for inflation, measured in current prices. On the other hand, real GDP takes into account price changes due to inflation, reflecting the actual output of the economy after adjusting for inflation.
For example, if nominal GDP increases from one period to the next due to price increases, but the actual production remains the same, real GDP will show a different picture as it adjusts for these price changes.
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