Real GDP
Real GDP measures gross domestic product using prices from a base year, eliminating the effect of inflation. It shows how much actual output has changed, distinguishing growth from mere price increases. Real GDP is calculated from nominal GDP by adjusting for inflation.
Real World
In 2022, UK nominal GDP grew by roughly 7%, but after adjusting for inflation of around 9%, real GDP actually fell — meaning the economy shrank in terms of actual output despite the headline figure looking positive.
Exam Focus
When analysing growth, always specify whether figures are real or nominal — examiners reward precise use of terminology.
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