Real GDP: When the goods and services are produced by all producing units in the domestic territory of a country during an accounting year and valued at base year's prices or constant price, is called real GDP or GDP at constant prices. It changes only by a change in physical output not by a change in price level. It is called a true indicator of economic development.
Nominal GDP: When the goods and services are produced by all producing units in the domestic territory of a country during an accounting year and valued at current year's prices or current prices, is called Nominal GDP or GDP at current prices. It is influenced by a change in both physical output and price level. It is not considered a true indicator of economic development.
Conversion of Nominal GDP into Real GDP:
Real GDP = (Nominal GDP / Price Index) x 100
GDP Deflator: The ratio of nominal to real GDP is a well-known index of prices. This is called GDP Deflator.