Real GDP adjusts for inflation and is the most accurate portrait of an economy’s trajectory. By removing inflation as a variable, real GDP can tell economists if a nation’s economy is growing, shrinking, or remaining constant.
What Is Real GDP?
Real Gross Domestic Product, or real GDP, is the inflation-adjusted total economic output of a nation’s goods and services in a given period of time. Also known as “constant price GDP,” “inflation-corrected GDP,” or “constant dollar GDP,” real GDP is derived by isolating and removing inflation from the equation by placing value at base-year prices, making GDP a more accurate reflection of a nation’s economic output.