what is the significance of real gdp
Dear student
Real GDP refers to GDP at constant prices (prices of base year). In other words it is market value of goods and services produced within domestic territory of a country during an accounting year as estimated at base year prices.
As in it prices remains constant and any change in real GDP would mean change in quantity of goods and services. If real GDP increases that means the flow of goods and services has increase in numbers and not just the value of those. In general, value may increase due to increase in prices also but with real GDP value will only increase when quantity will increase as prices are constant. Thus, any change in prices (due to any macro variable) does not impact value of real GDP.
The increase in real GDP would mean increase in availability of goods and services to people. That means greater standard of living and economic welfare. Hence, real GDP is actual indicator of welfare and growth.
Regards
