How to Calculate Real GDP

Real GDP equals nominal GDP divided by the GDP deflator, times 100 — it removes the effect of price changes.

Formula

Real GDP = (Nominal GDP ÷ GDP deflator) × 100

Steps

1
Find nominal GDP. GDP measured in current-year prices.
2
Find the GDP deflator. A price index for all goods in GDP, with the base year set to 100.
3
Divide and rescale. Real GDP = (Nominal GDP ÷ GDP deflator) × 100, expressing output in base-year dollars.

Worked example

If nominal GDP is $21T and the GDP deflator is 117, then Real GDP = (21 ÷ 117) × 100 = $17.95 trillion in base-year dollars.

Frequently asked questions

Why use real GDP instead of nominal GDP?

Real GDP holds prices constant, so changes reflect actual changes in output rather than inflation. It is the better measure of economic growth and living standards.

What does real GDP equal in the base year?

In the base year the deflator is 100, so real GDP equals nominal GDP.

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