HT201406: If the screen on your iPhone, iPad, or iPod touch doesn't respond to touch
Learn about If the screen on your iPhone, iPad, or iPod touch doesn't respond to touch
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Helpful answers
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Dec 13, 2013 9:03 AM in response to KaelynJonesby lllaass,If you restored to factory settings/new iPod via iTunes (Not via Settings>General>Reset>Erase all Content and Setting) and still have the problem that indicates a hardware problem.
Make an appointment at the Genius Bar of an Apple store. You likely have a bad digitizer
Apple Retail Store - Genius Bar
Apple will exchange your iPod for a refurbished one for $99 for your 32 GB 4G. They do not fix yours.
A third-party place like the following maybe less. Google for more.
iPhone Repair, Service & Parts: iPod Touch, iPad, MacBook Pro Screens
Replace the screen yourself if you are up to it