Economics Real Vs Nominal Gdp Questions Medium
The formula for calculating real GDP is as follows:
Real GDP = (Nominal GDP / GDP Deflator) * 100
In this formula, nominal GDP refers to the total value of goods and services produced in an economy during a specific period, measured at current market prices. The GDP deflator is a price index that measures the average price level of all final goods and services produced in an economy. It is used to adjust nominal GDP for inflation or deflation, providing a more accurate measure of economic output over time.
By dividing nominal GDP by the GDP deflator and multiplying the result by 100, we can obtain the real GDP, which represents the value of goods and services produced in an economy adjusted for changes in the overall price level. This allows for a comparison of economic output across different time periods, accounting for the effects of inflation or deflation.