How to Calculate a Natural Real GDP

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It is easy to figure real GDP.
It is easy to figure real GDP. (Image: Hemera Technologies/Photos.com/Getty Images)

Real gross domestic product, or real GDP, addresses the gross domestic product with inflation rates considered. So, to assess natural real GDP, it's essential to assess inflation, as well. Inflation begins with a base year and analyzes the prices of the base year to the current year. After you've ascertained the inflation rate, also called the GDP deflator, you may alternate from nominal gross domestic product, which is GDP in current prices, to the natural real GDP.

Subtract the base year GDP from the current GDP to determine change. For example, assume the natural base year GDP is $600 and the natural current year GDP is $700. So, $700 minus $600 equals $100.

Divide the change in GDP by the base year GDP to calculate the GDP deflator. In the same example, the change is $100. You must divide $100 by $600 which equals 0.17.

Divide the natural real current year GDP by the GDP deflator to determine real GDP. For the example, $700 divided by 0.17, which equals $4117 as the real GDP.

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