Real Gross Domestic Product

Real GDP

Gross domestic product after accounting for inflation. Comparing real GDP from year to year shows the amount an economy has grown or shrunk and how this actually affects the economy because they show how the buying power of money has been affected. Nominal GDP, on the other hand, does not account for inflation. For example, if the nominal GDP has grown 10% and the inflation rate is 3%, the real GDP growth is 7%.

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Real Gross Domestic Product (GDP)

What Does Real Gross Domestic Product (GDP) Mean?

This inflation-adjusted measure reflects the value of all the goods and services produced in a particular year, expressed in base-year prices. Often referred to as constant-price GDP, 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 thus provide a more accurate figure. It is important to understand that a rise in GDP does not necessarily indicate growth unless inflation is factored in. Real GDP figures are normally lower than nominal GDP figures.

Related Terms:
• Consumer Price Index—CPI
• Deflation
• Gross Domestic Product—GDP
• Inflation
• Nominal GDP