An inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price," "inflation-corrected" GDP or "constant dollar GDP"Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure.Let's consider an example. Say in 2004, nominal GDP is $200 billion. However, due to an increase in the level of prices from 2000 (the base year) to 2004, real GDP is actually $170 billion. The lower real GDP reflects the price changes while nominal does not.
A gross domestic product (GDP) figure that has not been adjusted for inflation.Also known as "current dollar GDP" or "chained dollar GDP." It can be misleading when inflation is not accounted for in the GDP figure because the GDP will appear higher than it actually is. The same concept that applies to return on investment (ROI) applies here. If you have a 10% ROI and inflation for the year has been 3%, your real rate of return would be 7%. Similarly, if the nominal GDP figure has shot up 8% but inflation has been 4%, the real GDP has only increased 4%.
