Real GDP Calculation Formula

Formula

The formula to calculate real GDP is:

\[ \text{Real GDP} = \frac{\text{Nominal GDP}}{\text{Price Index}} \times 100 \]

Where:

Nominal GDP is the gross domestic product measured at current market prices.
Price Index is a measure of the average level of prices in the economy.

Example

Let's say the nominal GDP is $1,000,000 and the price index is 120. Using the formula:

\[ \text{Real GDP} = \frac{1,000,000}{120} \times 100 = 833,333.33 \]

So, the real GDP is $833,333.33.

What is Real GDP?

Real GDP is the measure of a country's economic output adjusted for price changes (inflation or deflation). It provides a more accurate reflection of an economy's size and how it's growing over time.