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Real gross domestic product (real GDP) is a
macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...
measure of the value of economic
output Output may refer to: * The information produced by a computer, see Input/output * An output state of a system, see state (computer science) * Output (economics), the amount of goods and services produced ** Gross output in economics, the value of ...
adjusted for price changes (i.e.
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
or
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
). This adjustment transforms the money-value measure,
nominal GDP Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
, into an
index Index (or its plural form indices) may refer to: Arts, entertainment, and media Fictional entities * Index (''A Certain Magical Index''), a character in the light novel series ''A Certain Magical Index'' * The Index, an item on a Halo megastru ...
for quantity of total output. Although GDP is total output, it is primarily useful because it closely approximates the total spending: the sum of consumer spending, investment made by industry, excess of exports over imports, and government spending. Due to inflation, GDP increases and does not actually reflect the true growth in an economy. That is why the GDP must be divided by the inflation rate (raised to the power of units of time in which the rate is measured) to get the growth of the real GDP. Different organizations use different types of 'Real GDP' measures, for example, the
UNCTAD The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...
uses 2005 Constant prices and
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
s while the
FRED Fred may refer to: People * Fred (name), including a list of people and characters with the name Mononym * Fred (cartoonist) (1931–2013), pen name of Fred Othon Aristidès, French * Fred (footballer, born 1949) (1949–2022), Frederico Ro ...
uses 2009 constant prices and exchange rates, and recently the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
switched from 2005 to 2010 constant prices and exchange rates.


Economic sectors of nations using real GDP


Relationship with nominal GDP

Real GDP is an example of the distinction between real vs. nominal values in
economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...
. Nominal gross domestic product is defined as the market value of all final goods produced in a geographical region, usually a country. That market value depends on the quantities of goods and services produced, and their respective prices. If a set of real GDPs from various years are calculated, each using the quantities from its own year, but all using the prices from the same base year, the differences in those real GDPs will reflect only differences in volume. An index called the
GDP deflator In economics, the GDP deflator (implicit price deflator) is a measure of the money price of all new, domestically produced, final goods and services in an economy in a year relative to the real value of them. It can be used as a measure of the va ...
can be obtained by dividing, for each year, the nominal GDP by the real GDP, so that the GDP deflator for the base year will be 100. It gives an indication of the overall level of price change (inflation or deflation) in the economy. :GDP deflator for year t=\frac\times100 Real GDP growth on an annual basis is the nominal
GDP growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
rate adjusted for inflation. It is usually expressed as a percentage.
Nomenclature Nomenclature (, ) is a system of names or terms, or the rules for forming these terms in a particular field of arts or sciences. The principles of naming vary from the relatively informal naming conventions, conventions of everyday speech to the i ...
: "GDP" may refer to "
nominal Nominal may refer to: Linguistics and grammar * Nominal (linguistics), one of the parts of speech * Nominal, the adjectival form of "noun", as in "nominal agreement" (= "noun agreement") * Nominal sentence, a sentence without a finite verb * Nou ...
" or "current" or "historical" GDP, to distinguish it from the real GDP. The real GDP is sometimes called "constant" GDP because it is expressed in terms of constant prices. Depending on context, "GDP" may also refer to real GDP...


Notes and references


External links


Google - public data
GDP and Personal Income of the U.S. (annual): Quantity Index for Real GDP
Google - public data
GDP and Personal Income of the U.S. (annual): Real Gross Domestic Product
Google - public data
GDP and Personal Income of the U.S. (annual): Real Gross Domestic Product per capita {{DEFAULTSORT:Real Gross Domestic Product Macroeconomic aggregates National accounts Gross domestic product