Real GDP
Definition
Real GDP refers to the total value of all goods and services produced within a country's borders, adjusted for inflation. It measures the economic output of a nation over a specific period.
Analogy
Think of real GDP as a measuring tape that shows the actual size of an economy. Just like a measuring tape accounts for changes in length due to stretching or shrinking, real GDP adjusts for changes in prices caused by inflation.
Related terms
Nominal GDP: Nominal GDP is the total value of all goods and services produced within a country's borders, without adjusting for inflation.
Economic growth: Economic growth refers to an increase in real GDP over time. It indicates that an economy is expanding and becoming more productive.
Business cycle: The business cycle represents the fluctuations in economic activity, including periods of expansion (economic growth) and contraction (recession). It reflects changes in real GDP.
"Real GDP" appears in:
Study guides (7)
AP Macroeconomics - 2.6 Real vs Nominal GDP
AP Macroeconomics - 3.6 Changes in the AD-AS Model in the Short Run
AP Macroeconomics - 3.7 Long-Run Self-Adjustment
AP Macroeconomics - 4.5 The Money Market
AP Macroeconomics - 5.2 The Phillips Curve
AP Macroeconomics - 5.3 Money Growth and Inflation
AP Macroeconomics - 5.7 Public Policy and Economic Growth
Additional resources (1)
Practice Questions (4)
What is the relationship between the price level and Real GDP?
What was the relationship between the potential and real GDP during the U.S. economy's recessionary gap in 2005?
How does a decreasing SRAS impact real GDP, unemployment, and price levels?
What is the result of a decrease in the money supply on the price level in the long run, assuming the velocity of money and real GDP remain constant?
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