Real Gross Domestic Product (GDP)

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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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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. 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 >>
  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 >>
  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 >>

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