Which statement correctly distinguishes nominal GDP from real GDP and explains why inflation adjustment is necessary?

Which statement correctly distinguishes nominal GDP from real GDP and explains why inflation adjustment is necessary?

• A. Nominal GDP uses current prices; Real GDP uses constant prices; inflation adjustment is necessary to compare across years.
• B. Nominal GDP uses constant prices; Real GDP uses current prices; inflation adjustment is unnecessary.
• C. Nominal GDP excludes government spending; Real GDP includes government spending; inflation adjustment is optional.
• D. Nominal GDP uses current prices; Real GDP uses constant prices; inflation adjustment does not affect year-to-year comparisons.

Answer: (A)