What is the real GDP?

The

gross domestic product of the country (GDP) is measured by the value of goods and services produced over a defined period of time. The real gross domestic product (real GDP) adjusts this value to inflation or deflation. This economic tool helps to calculate the GDP defiler and the total monetary value of the country or individual.

GDP is roughly calculated by adding all the income or all country expenditure. The resulting value helps to determine the health of the economy, often compared to the calculation of the previous year. Increasing income or reducing expenditure means that the economy is healthier. The actual GDP supports these calculations by accounting inflation and deflation.

Inflation is the percentage increase in the price of goods or services during the year. Deflation is the opposite to reduce prices or services. The real GDP uses these factors because the comparison of GDP between two years does not have to be a remarkable inflation or deflation in the second year.

The real GDP is calculated using the basic year for comparison. For example, ifSomeone calculated the real GDP of 2011, would like to create a year with known prices. 2011 calculations can use 2010 as a basic year. The costs of goods and services since 2011 would be known by known prices since 2010 to detect the average cost.

Real GDP calculated can be used in the formula to find the GDP deflator. This economic tool measures the price index for a particular year. The GDP for a given year is divided by the actual GDP for a given year and the result is multiplied by 100 for the GDP defler. When this calculation is done using the basic year as a GDP, the result will be simply zero since the GDP of the basic year and real GDP has canceled each other in the division.

General NumernS for this tool Calculate the country's economic value. The division of this country's population measurement will find real GDP per capita. Calculation on the head helps to determine the quality of life that the ordinary population experiences inthis country. It can also be used to compare and compare the currency values ​​of two separate countries.