What is the difference between nominal GDP and real GDP?

Nominal GDP measures a country's economic output based on current prices without adjusting for inflation, reflecting the value of goods and services produced in a specific period at the prices that exist at that time. Conversely, real GDP accounts for inflation by adjusting the economic output to reflect the value of goods and services at constant prices, allowing for a more accurate comparison of economic performance over time. This distinction is crucial because it highlights how inflation can distort the perception of economic growth when solely using nominal figures. By measuring the economy in constant dollars, real GDP provides a clearer picture of actual increases in production and economic wellbeing.