Nominal GDP takes into account these factors such as inflation, price changes, changing interest rates and money supply, at the time of determining GDP. 2. Real GDP : Real GDP is said to be the value of all goods and services determined in an economy after taking into account the rate of inflation.
Revised End-of-Chapter Exercises: Chapter 7 1 Review Questions 1. Explain why the demand for money is inversely related to the nominal interest rate. 2. Why is the money multiplier greater than unity? 3. What happens to the money supply if there is an increase in the required reserve ratio? 4.