Calculation: Real GDP and GNI
Measuring Economic Activity and Illustrating Its Variations
AO2·AO4
Syllabus requirement
Students should calculate real GDP and GNI using nominal figures and a price deflator (e.g., GDP deflator index).
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Summary
This topic explains the difference between nominal and real measures of national income (GDP and GNI) and shows how to convert nominal values into real values using a price deflator. Real GDP and real GNI remove the effect of changes in the general price level so that changes in the volume of economic activity can be identified. The GDP deflator is the price index used for this adjustment, and the same method applies to convert nominal GNI into real GNI after adjusting for net factor income from abroad.