Real gross domestic product (GDP) is a measure that shows the value of all goods and services produced in an economy during a specific year, adjusted for inflation. It uses prices from a base year. This is also known as constant-price Real Gross Domestic Product, inflation-adjusted Real Gross Domestic Product, or constant-dollar Real Gross Domestic Product. In simple terms, real Real Gross Domestic Product indicates the total economic output of a country while accounting for price changes.
Learn more about Real GDP
Real Real Gross Domestic Product is a key economic measure that shows the value of all goods and services produced in an economy over a certain time, while adjusting for changes in prices. It reflects the overall economic output of a country, considering price changes caused by inflation or deflation.
Governments look at both nominal and real Real Gross Domestic Product to study economic growth and how purchasing power changes over time. They use the Real Gross Domestic Product price deflator, which tracks price changes for all goods and services in the economy. To find real Real Gross Domestic Product, economists adjust nominal Real Gross Domestic Product for these price changes.
The Bureau of Economic Analysis (BEA) releases a quarterly report on GDP that includes key statistics for real Real Gross Domestic Product levels and growth. The report also features nominal Real Gross Domestic Product, referred to as current dollar Real Gross Domestic Product. Real Real Gross Domestic Product differs from nominal Real Gross Domestic Product because it adjusts for price changes, giving a clearer picture of economic growth.
Real GDP Calculation
Finding real GDP is a complicated task usually done by the BEA. To get real GDP, you generally divide nominal Real Gross Domestic Product by the Real Gross Domestic Product deflator (R).
Real GDP = Nominal GDP / R
where:
GDP = Gross domestic product
R = GDP deflatorThe BEA releases the deflator every three months. The Real Gross Domestic Product deflator measures inflation compared to a base year. By dividing the nominal GDP by the deflator, we can eliminate the impact of inflation.
If prices in an economy have gone up by 1% since the base year, the deflation factor is 1.01. So, if the nominal Real Gross Domestic Product is $1 million, the real Real Gross Domestic Product would be $1,000,000 divided by 1.01, which equals $990,099.
Conclusion
Real Real Gross Domestic Product is a measure of a country’s economic production for a particular year. It shows the total value of all goods and services made, adjusting for inflation. You might also see it called constant-price Real Gross Domestic Product or inflation-adjusted Real Gross Domestic Product. This is different from nominal GDP, which measures output using current prices.