How to Calculate Real GDP
The real gross domestic product of a country measures the value of its economic activity. But how can you calculate it?
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You Will Need
- Base year
- Base year prices
- Economic activity values
Steps
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Step 1
Understand real GDP
Know that a country's GDP is the sum of the prices of all goods and services produced in its economy during a set period of time.
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Step 2
Understand base years
Understand that real GDP is the sum of all produced goods and services at constant prices gleaned from a specified base year. Real GDP permits a comparison of economic growth from year to year in terms of production of goods and services.
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In contrast, nominal GDP is the sum of the value of all produced goods and services at current prices. Nominal GDP is a better indicator of sheer output than the value of output over time.
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Step 3
Choose a base year
Choose a base year. The prices for this year will be used for the calculations in the other years as well.
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Step 4
Evaluate economic activity
Evaluate economic activity by determining the values of consumer spending, investment, government spending, and net exports in base year prices.
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Step 5
Calculate the sum
Calculate the sum of these separate contributions to GDP. Then compare your country's ranking with that of others.
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The real GDP of the United States was approximately $12.9 trillion in 2009.
