How To Change Gdp Into Real Gdp
Existent GDP Formula (Tabular array of Contents)
- Formula
- Examples
- Computer
What is Real Gross domestic product Formula?
Real Gdp measures the economic output of a country which accounts for the effects of inflation and deflation. Real Gross domestic product provides a more realistic cess of the economic system than the Nominal Gross domestic product. If real GDP is not considered then it would look like the country is producing more when the prices are gone up
It is as well known every bit an aggrandizement-adapted gross domestic product. It uses constant base-year prices for measuring the value of final goods and services
Formula For Real GDP is represented as,
Real GDP = Nominal Gdp / Deflator
Where,
Nominal Gdp is calculated equally
Nominal Gross domestic product = Consumption + Investment + Government Spending + Cyberspace Exports
Examples of Real GDP Formula (With Excel Template)
Let's take an example to understand the calculation of Real Gdp in a better manner.
Yous can download this Real Gdp Formula Excel Template here – Real Gdp Formula Excel Template
Real GDP Formula – Example #1
Let u.s.a. look at an example to calculate the real Gdp using a sample of a handbasket of products
Solution :
Nominal GDP is calculated every bit:
- Vegetables = ($10 * 200) + ($11 * 220) + ($13 * 230) = $7410
- Juice = ($8 * 130) + ($10 * 110) + ($11 * 90) = $3130
- Cheese = ($five * 50) + ($6 * twoscore) + ($seven * 50) = $840
- Milk = ($12 * 20) + ($thirteen * 22) + ($15 * 26) = $916
- Fruits = ($15 * 25) + ($16 * xxx) + ($xix * 35) = $1520
Existent Gdp is calculated as
Existent Gdp is calculated past using 2016 equally Base Year
- Vegetables = ($x * 200) + ($10 * 220) + ($10 * 230) = $6500
- Juice = ($8 * 130) + ($viii * 110) + ($eight * 90) = $2640
- Cheese = ($5 * 50) + ($5 * 40) + ($5 * fifty) = $700
- Milk = ($12 * 20) + ($12 * 22) + ($12 * 26) = $816
- Fruits = ($15 * 25) + ($15 * 30) + ($15 * 35) = $1350
Equally you tin see in the table above, the real GDP is lower than the nominal Gdp. This is because the nominal Gdp includes inflation. To calculate the GDP deflator, divide the nominal GDP to existent GDP
Deflator is calculated using the formula given below
Deflator = Nominal GDP / Existent Gdp
- Vegetables = $7410 / $6500 = 1.14
- Juice = $3130 / 2640 = 1.19
- Cheese = $840 / $700 = one.20
- Milk = $916 / $816 = one.12
- Fruits = $1520 / $1350 = 1.xiii
Real Gdp Formula – Example #2
Assume that the nominal Gdp of the US was $xi trillion and in the twelvemonth 2017 was $11 trillion and the inflation rate was ten%. Calculate the real Gross domestic product.
Solution:
The aggrandizement rate is ten% a twelvemonth making the deflator to be 1.1.
Real Gross domestic product is calculated using the formula given below
Existent Gdp = Nominal Gdp / Deflator
- Real Gross domestic product = $eleven trillion / 1.1
- Real Gdp = $x trillion
Only due to inflation it can exist seen that the nominal GDP was up by ten%. Using the real Gross domestic product formula we accept found that the inflation-adjusted Gross domestic product is $10 trillion
Real Gross domestic product Formula – Example #3
Calculate the Real GDP and Growth Rate of Real GDP and Nominal GDP using the following data
Solution:
For all the years except for the base year, we will at present calculate the Gross domestic product deflator. The Gdp deflator is the number that when divided into nominal Gdp and multiplied by 100, yields the real GDP for that year
Deflator is Calculated by taking 1994 every bit Base Year
Deflator is calculated using the formula given below
Deflator = [(Value of Basket Current Twelvemonth)/( Value of Basket Base Year)]*100
For 1965,
- Deflator = [($260,000) / ($1,000,000)] * 100
- Deflator = 26
For 2001
- Deflator = [($one,085,100) / ($1,000,000)] * 100
- Deflator = 108.51
Nosotros can now calculate real GDP for every yr in 1994 dollars. Note that real Gross domestic product for the base year is equal to the nominal GDP for that year.
Real Gross domestic product is calculated using the formula given beneath
Real GDP = (Nominal Gross domestic product / Deflator) * 100
For 1994
Real Gdp for the base year is equal to the nominal Gross domestic product for that yr
- Existent Gdp = $eight trillion
For 1965
- Real GDP = ($ane trillion / 26) * 100
- Real Gross domestic product = $3.85 trillion
For 2001
- Real GDP = ($10 trillion / 108.51) * 100
- Real GDP = $ix.216 trillion
Growth Rate of Nominal Gdp is calculated as:
- Growth Rate of Nominal Gross domestic product = [($10 trillion – $i trillion)/ $1 trillion]*100%
- Growth Rate of Nominal GDP = 900%
Growth Rate of Real GDP is calculated as:
- Growth Rate of Real GDP = [($9.216 trillion – $3.85 trillion)/ $3.85 trillion]*100
- Growth Rate of Real Gross domestic product = 140%
Explanation
The Gdp formula of factors like investment, consumption, public expenditure by authorities and net exports
- Investment: Investment means additions to the physical stock. The investment includes everything including the structure of housing societies, offices, factories and an increase in the inventories of goods. The gross investment includes depreciation
- Consumption: This consumption includes money spent on goods and services by private households and non-profit institutions. This includes the consumption of durable, semi-durable and non-durable appurtenances and services. This private consumption includes expenditures on all these categories of goods and services
- Government Purchases of appurtenances and services: This factor includes all the spending of government on goods and services. This also includes all the salary and wages paid by the government
- Net Exports: Information technology shows the difference between imports and exports. The deviation between exports and imports is cyberspace exports
Relevance and Uses of Real Gross domestic product Formula
Real GDP is mainly used to calculate economical growth. The GDP growth charge per unit is calculated by using percentage alter. Real Gdp is used to summate real growth non simply increasing wages and increase in toll.
Gross domestic product mainly is important for investors to reallocate the asset allotment of their portfolios. During this, they also compare the GDP with other countries. Countries with higher growth numbers concenter strong investors for the stocks, bonds and also for sovereign debt
Real Gdp rates are too used by the Fed when deciding for increasing or decreasing the involvement rate. Fed generally increases the rate when the growth is fast and decreases the rate when the growth is low. Real Gross domestic product tells how much the country is really producing. Real Gdp is comparable and can exist compared to countries beyond
Existent GDP Formula Computer
You tin use the following Real Gdp Formula Calculator
| Nominal Gross domestic product | |
| Deflator | |
| Real Gross domestic product | |
Recommended Articles
This is a guide to Existent Gdp Formula. Hither nosotros discuss how to calculate Real GDP Formula forth with practical examples. We also provide a Real GDP figurer with a downloadable excel template. Yous may also await at the following articles to learn more –
- Formula For GDP Deflator
- How to Calculate Nominal Gdp using Formula
- Examples of National Income Formula
- Calculator For Coin Multiplier Formula
- Internet Exports Formula
- Multiplier Formula ( Examples and Excel Template)
Source: https://www.educba.com/real-gdp-formula/
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