Real Gross Domestic Product (GDP)


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".


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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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  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 >>
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    A large discrepancy between a nation's real and nominal GDP signifies inflationary or deflationary forces in the economy. ... Read Full Answer >>
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    Human capital and economic growth have a strong relationship. Human capital affects economic growth and can help to develop ... Read Full Answer >>
  5. When do economists use real GDP instead of GDP?

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  6. 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 >>
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