Real Gross Domestic Product (GDP)

AAA

DEFINITION of 'Real Gross Domestic Product (GDP)'

An inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price," "inflation-corrected" GDP or "constant dollar GDP".

INVESTOPEDIA EXPLAINS 'Real Gross Domestic Product (GDP)'

Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure.

Let's consider an example. Say in 2004, nominal GDP is $200 billion. However, due to an increase in the level of prices from 2000 (the base year) to 2004, real GDP is actually $170 billion. The lower real GDP reflects the price changes while nominal does not.

VIDEO

Loading the player...
RELATED TERMS
  1. Rule Of 70

    A way to estimate the number of years it takes for a certain ...
  2. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  3. Inflation

    The rate at which the general level of prices for goods and services ...
  4. Gross National Product - GNP

    An economic statistic that includes GDP, plus any income earned ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
RELATED FAQS
  1. How can I find out the Medicare sustainable growth rate?

    Per the Social Security Act, the Medicare Payment Advisory Commission is required to make an estimate of the sustainable ... Read Full Answer >>
  2. What is the relationship between nominal GDP and PPP (purchasing power parity)?

    Gross domestic product (GDP) represents an accounting of the total value of all final goods and services produced in a geographic ... Read Full Answer >>
  3. What does it signify if there is a large discrepancy between a nation's real and ...

    A large discrepancy between a nation's real and nominal GDP signifies inflationary or deflationary forces in the economy. ... Read Full Answer >>
  4. What is the relationship between human capital and economic growth?

    Human capital and economic growth have a strong relationship. Human capital affects economic growth and can help to develop ... Read Full Answer >>
  5. Is real GDP a better index of economic performance than GDP?

    Real GDP is a much better index for expressing the output of an economy, as it takes into account the fluctuating value of ... Read Full Answer >>
  6. When do economists use real GDP instead of GDP?

    Economists use real GDP when they want to monitor the growth of output in an economy. Nominal GDP, typically referred to ... Read Full Answer >>
  7. What are some alternatives to real GDP?

    Real GDP is used for assessing a country’s economic performance over a given time. Other measures used for this are nominal ... Read Full Answer >>
  8. How much of an economy's performance is captured by real GPD?

    Real GDP is designed to capture the total value produced in an economy in a given period, with the effect of inflation excluded. ... Read Full Answer >>
Related Articles
  1. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  2. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Options & Futures

    Pick Stocks Like Peter Lynch

    Learn the basic tenets that helped this famous investor earn his fortune.
  5. Economics

    The Most Likely Outcome For Greece

    After more than five years of a Greek drama, most of us have become fatigued with hearing about Greece’s debt problems, the one issue that won’t go away.
  6. Economics

    What The Fed Needs To Consider Before A Rate Hike

    Everyone, from colleagues to clients, has some interpretation of when and if the Fed should raise short-term rates and start to normalize monetary policy.
  7. Economics

    Google Is Now Richer Than Over 100 Countries

    Find out where Google ranks among the wealthiest nations of the world and which countries report GDP figures below the tech giant's annual revenue.
  8. Economics

    Is The Yuan The New Greenback?

    China is increasingly top of mind for investors. While bulls see an opportunity in a massive equity rally, bears are focused on a slowing economy.
  9. Stock Analysis

    Is Now the Time to Bet on Vacation Spending?

    As Americans embark on summer trips, investors can benefit by adding exposure to the travel and leisure sector.
  10. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!