What is the primary difference between nominal GDP and real GDP when comparing economic performance over time?

The primary difference between nominal GDP and real GDP is how they account for inflation. Nominal GDP measures the total value of all goods and services produced in a country at current prices, which means it can be affected by changes in price levels. On the other hand, real GDP adjusts for inflation, providing a clearer picture of an economy's actual growth by reflecting the value of goods and services at constant prices. For example, if a country produced the same amount of goods this year as last year, but prices increased, nominal GDP would show growth due to higher prices, while real GDP would show no change, indicating that the economy did not actually grow. This distinction is important for understanding whether an economy is truly improving or just experiencing rising prices.