Real GDP = (Nominal GDP / Price Index of the current year) x 100
Example 1
- 2020 Nominal GDP = £1,190. Price index = 100
- 2023 Nominal GDP = £1,410. Price Index = 121
Question: Calculate Real GDP for 2023 expressed in 2020 prices.
2023 Real GDP = 1,410 *100/121 = £1,165.29
What is economic growth between 2023 and 2010?
- Increase in real GDP = £1,165.29 – £1,190 = £ -24.71
Economic growth rate = change in real GDP/Initial real GDP x 100
- -24.71/1190 = -2%
What is real GDP in 2023 in 2022 Prices
- 2022 Nominal GDP = 350 Price index = 100
- 2023 Nominal GDP = 390. Price Index =108
- Real GDP = 390 x 100/108 = 361.1
- Economic growth rate = 11/350 = 3.14%
- 2022 Nominal GDP = 134. Price index = 107
- 2023 Nominal GDP = 139. Price index = 109
What is 2023 Real GDP at 2022 Prices
This time in 2022, the price index is 107, rather than 100 (which makes calculation less straightforward
Real GDP = nominal GDP x (price index (2022)/Price index 2023
- Real GDP = 134 x (107/109) = 136.45
- Growth rate = 2.45/134 = 1.83%
An economy’s GDP increased from £200 billion in 2021 to £228 billion in 2022. Using 2021 as the base year, what is the value of the index for GDP in 2018?
2021 = 100 (base year)
- Increase in GDP = 28/200 = 14%
- Index in 2018 = 100 +14% = 114