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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. Step 5

    Calculate the sum

    Calculate the sum of these separate contributions to GDP. Then compare your country's ranking with that of others.

  7. The real GDP of the United States was approximately $12.9 trillion in 2009.

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