What Is Real GDP?

Real GDP is the market value of all final products of the year calculated using prices from a certain year as the base period. It measures changes in the output of products in the economy in two different periods, and calculates the value of all products produced in the two periods at the same price or constant amount.

Real GDP

Example: Taking 2001 as the base year, calculate the nominal GDP and real GDP in the following years

years	Hot dog price	Hot dog yield	Nominal GDP	Real GDP
2001	8 yuan	6	8 * 6 = 48	8 * 6 = 48 (calculated at current year's price)
year 2002	10 yuan	7	10 * 7 = 70	8 * 7 = 56 (based on the selected base year-2001 prices)

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Relationship between real GDP and nominal GDP

Real GDP and nominal GDP are usually not the same. The nominal GDP growth rate is equal to the sum of the real GDP growth rate and the inflation rate. The price changes caused by inflation, even if the output has not changed, the nominal GDP is still Will rise. The GDP deflator can be obtained by dividing the actual GDP and nominal GDP each year. The base year's GDP deflator is 1, which reflects the overall level of economic price changes (inflation or contraction).

GDP deflator for a certain year = (nominal GDP for that year / real GDP for that year) × 100

The annual growth rate of real GDP is the inflation-adjusted nominal GDP growth rate, which is usually expressed as a percentage. ^[2]