How to Calculate Nominal GDP
Nominal GDP is the value of all final goods and services produced this year, measured at current-year prices: price times quantity, summed.
The Nominal GDP formula
Calculator
Enter this year's quantities and prices to get nominal GDP, then value the same output at base-year prices.
Quantity of the first final good produced this year.
The price it actually sold for this year, not a base-year price.
Quantity of the second final good produced this year.
Current-year price of the second good.
Used only to value the identical output at constant prices.
Base-year price of the second good.
Valuing this year's output at this year's prices gives $100,000, the headline figure before any inflation adjustment.
- Laptop output at current prices
- $80,000
- Chair output at current prices
- $20,000
- Same output at base-year prices
- $92,500
- Price change, not extra output
- $7,500
- Price level reading
- Prices above the base year
Quantity times this year's price for the first good.
Quantity times this year's price for the second good.
The identical goods valued at base-year prices come to $92,500, which is the real measure of the same output.
$7,500 of the nominal figure is higher prices rather than a change in how much was produced.
How to calculate Nominal GDP, step by step
- 1List this year's final output. Write down the quantity of each final good and service the economy produced during the year.
- 2Use this year's prices. Pair each quantity with the price it actually sold for this year, not a base-year price.
- 3Multiply price by quantity. Compute price × quantity for every final good and service.
- 4Add the products together. The sum is nominal GDP, which you can also reach by adding C, I, G, and net exports at current prices.
- 5Deflate it if you need real GDP. Divide nominal GDP by the GDP deflator and multiply by 100 to strip out price changes.
Worked example: Nominal GDP
An economy produces 100 laptops at $800 each and 500 chairs at $40 each this year. Nominal GDP = (100 × $800) + (500 × $40) = $80,000 + $20,000 = $100,000. Those same goods sold for $750 and $35 in the base year, so valuing the identical output at base-year prices gives (100 × $750) + (500 × $35) = $75,000 + $17,500 = $92,500. The $7,500 gap is price change, not extra output.
Nominal GDP questions
What is the difference between nominal and real GDP?
Nominal GDP uses current-year prices, so it rises when prices rise or output rises. Real GDP uses base-year prices, so it changes only when output changes.
How do you convert nominal GDP to real GDP?
Divide nominal GDP by the GDP deflator and multiply by 100. In the base year the deflator equals 100, so the two figures match.
Does nominal GDP include used goods?
No, only final goods and services produced during the current year count, so resales of used cars and houses are excluded. The broker's commission does count, because that service was produced this year.
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