Real Gross Domestic Product (GDP)
Candlefocus EditorReal GDP is an important yardstick to assess the economic growth of a country over time, as it enables us to make meaningful comparisons between GDP figures from different years and different countries. The GDP deflator-adjusted figure eliminates the effects of fluctuating inflation, so that any observed changes in the level of output in a country can be accurately compared year-on-year, or compared with other countries. It also measures the economic activity of a country in terms of real, or base-year, prices so that any changes in the volume of output can be compared over time in order to gauge the true level of economic growth.
Real GDP is commonly used by governments, businesses and economists when making policy decisions and assessing the economic performance of a country. Regularly updated figures for Real GDP are produced by the Bureau of Economic Analysis in the United States and are used as an indication of both production and inflation levels. For example, if a country’s Real GDP rises year-on-year, this may indicate an increase in production, or a decrease in the level of inflation. Alternatively, a decrease in Real GDP could point to declining production levels or an increase in the price of goods and services.
Overall, Real GDP is a useful tool to measure the economic performance of a country and is widely used by economists and policy makers to understand the level of production and inflation. Real GDP measures the total value of all final goods and services produced in a country, adjusted for inflation, and is typically expressed in terms of base-year prices. This allows us to make meaningful comparisons between different years and different countries and helps us gauge the overall health and performance of the economy in question.