Economists use performance which gives the actual gross domestic product (GDP) rather than nominal GDP to determine the economic progress of an economy. Thus, they care more about real macroeconomic variables. Macroeconomic variables are quantified through real figures of the output of goods and services of a nation (Cohen & Burinskas, 2020). Changes in prices do not affect real GDP which leads to a reflection of quantities produced as a formidable measure of performance of an economy. The real macroeconomic variable is an effective method over nominal one because it gauges economic well-being through uninterrupted GDP which is not affected by variations in prices thus signifying only changes in the amounts of products being produced at a given time (Cohen & Burinskas, 2020). An economist cannot determine whether increments in nominal GDP has been caused by increased production or higher prices making it an unreliable mechanism of measure (Cohen & Burinskas, 2020) Actual values such as personal incomes and GDP are more important the nominal values as they help to determine the increment extents in an economic cycle.
Also, changes caused by inflation are determined easily through real performance variables which can give changes in prices, salaries, and taxation among other essential indicators. Real GDP reflects changes in production costs over a given time as opposed to nominal GDP that only shows adjustments in the purchasing power of consumers over a duration (Cohen & Burinskas, 2020). Since economists rely more on the quantification in the production sector to evaluate an economy, Real GDP will be more significant to them compared to the nominal one. The total amount of goods and services a country produces are more concerning to economists than what a nation consumes and this informs why macroeconomists would heavily depend on real macroeconomic variables.
Reference
Cohen, V., & Burinskas, A. (2020). The evaluation of the impact of macroeconomic indicators on the performance of listed real estate companies and REITs. Ekonomika, 99(1), 79-92.
