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)