How to Calculate a Base Year GDP

Calculate base year inflation by manipulating the percent change formula.

Inflation looks at the rise in GDP from a base year to a year sometime in the future. The base year is the year that sets the current prices. The second year is the year that you are comparing to the base year. In order to perform the inflation calculation, you need to use a percent change formula. The percent change formula is the second year minus the base year, then divide by the base year.

Instructions

1. Find the inflation rate and the ending GDP. For example, assume the inflation rate is 0.5 or 50% and the ending GDP is 600.

2. Format the equation. The normal percent change equation for inflation is inflation equals the ending year minus the beginning year, then divided by the beginning year. To solve for the beginning year, you reformat the equation to have base year equals ending balance divided by 1 plus inflation. In the example, the equation is then base year equals 600 divided by 1.5.

3. Solve the equation. In the example, 600 divided by 1.5 equals 400. So the base year GDP is 400.

References

• Math Goodies: Percent Change