Difference between real GDP and nominal GDP.

GDP of the state can be calculated in nominal and real terms. What is the specificity of both approaches to determining this economic indicator?

Facts about real GDP

Under real GDP is understood the value of goods and services produced in the state, calculated adjusted for the deflator coefficient, as well as taking into account a number of other macroeconomic parameters that make it possible to determine the volume of GDP at current prices.

So, for example, if the country's GDP in 2010 amounted to $ 1 trillion, and in 2011 - $ 1.5 trillion, despite the fact that prices in the state increased by 50%, then in real terms it will be close to zero.

Real GDP can be compared with another close macroeconomic indicator - GDP, calculated taking into account the purchasing power of the country's economy relative to other national economies. So, if two states produce the same volume of goods and services with different values, then their GDP can be considered the same based on the purchasing power parity of their economies.

It can be noted that the volume of GDP at purchasing power parity is most often determined not in national, but in international currencies - usually in US dollars.

The advantage of calculating the real GDP of a state is the ability to objectively compare the current volumes of its economy with the indicators of previous years and determine whether there has actually been economic growth.

For example, Russia's GDP from 2000 to 2014 grew by about 8 times. But taking into account inflation, its real growth is approximately twofold. In turn, in terms of purchasing power parity, Russia's GDP for the indicated period of time increased by about 3 times - this indicator is quite close, therefore, to real GDP.

Facts about nominal GDP

Under nominal GDP it is customary to understand the value of goods and services produced in the state without taking into account any coefficients and adjustments for price increases. It can be expressed both in national currency and in any of the foreign ones - at the current exchange rate of the Central Bank or currency exchanges.

Nominal GDP gives a very limited idea of ​​the real size of the economy, as well as its actual growth. It will be informative mainly only in cases where inflation is low or close to zero in the country.

The current nominal GDP of a country is usually significantly different from the GDP calculated using the purchasing power parity of the economy. The fact is that he may not take into account the difference in the cost of the same goods produced by factories in different countries.

For example, the nominal GDP of Russia in 2015, taking into account the increased dollar exchange rate, amounted to about 1.2 trillion US dollars. But when calculated taking into account purchasing power parity, Russia's GDP in 2015 is defined as corresponding to a much larger volume - about 3.5 trillion US dollars.

Comparison

The main difference between real GDP and nominal GDP is that when calculating the former, the deflator coefficient and other macroeconomic indicators are taken into account, allowing to objectively determine the actual volume of the economy and analyze the dynamics of its real growth... Nominal GDP is calculated without adjustments for any indicators.

Real GDP, to a greater extent than nominal, correlates with GDP calculated taking into account the purchasing power parity of the state economy.

Having determined what is the difference between real GDP and nominal GDP, let us fix the conclusions in the table.

Table

Real GDP Nominal GDP
Calculated taking into account the deflator coefficient and other parameters reflecting the rise in prices in the economyCalculated without taking into account the deflator coefficient and other indicators
is close to GDP at PPPMay differ significantly from GDP at PPP
Gives an objective assessment of the dynamics of economic growthas a rule, it is taken into account only if the rate of inflation in the economic system of the state is low)
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