Real Gross Domestic Product (GDP)

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What is the 'Real Gross Domestic Product (GDP)'

The real gross domestic product (GDP) is 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".

BREAKING DOWN '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.

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