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He is considered 'great' in a paradoxical sense. Gatsby is considered 'great' by the measurement of dreams, his wealth, his larger-than-life personality, the festivities and joviality that, to others in the novel, mark him as a man of high stature and almost god-like in personal proportions.
it will make him feel better. Gatsby has been trying all along to show them that he is their equal. Nick goes further by saying he is better than all of them. It is fortunate that he chose this moment to say this because it would be the last time he would see Gatsby alive.