Real GDP vs. Nominal GDP questions.....?

Real GDP is not a more accurate measure of newly produced goods and services than nominal GDP. Real GDP measures the same goods and services as nominal GDP, but USING THE PRICES OF A DIFFERENT YEAR.

For example, the GDP of 2008 using the prices of 1990 (or any other year), is the real GDP.

The GDP of 2008 using the 2008 prices, is the nominal GDP.

Nominal GDP is what an economy's production worths in current prices and real GDP is what the current production would worth at a different year. Both are valuable for making economic analysis...

GDP deflator is a by product of the procedure used in order to calculate real GDP from nominal GDP and is another measure of inflaction (such as the CPI - Consumer Price Index).

Real GDP is no a measure for inflation. Is just what GDP would be with zero inflation.....

GDP is a sum of the value of final goods and services produced in a country within the year. A nominal value of the final goods is P x Q, or P =price of that good, Q= quantity of that good.The sum of these values will contain price effects. Because the value can increase when P increases and Q remain constant. So the price deflator is used to get rid of this effect, by dividing the nominal GDP by the deflator. The real GDP will measure a real increase of quantity produced.

OK, your hang-up is that you don't understand that GDP by itself is a static number, it's not a comparison or a growth rate. It's a snapshot frozen in time. Because of that, "Real GDP" by itself has no meaning. You are using a term that is not used by economists. Or to be more exact, you are using "real GDP" as a noun. Economists only use "real GDP" as an adjective, as in "real GDP growth" or "real GDP growth rate".

Although people might casually say "GDP is 1.5%" what they are REALLY saying is "the GDP growth RATE is 1.5%." Just "GDP" by itself cannot be a percent, it is not a rate.

The word "real" only comes into play when talking about GDP *changes* from one year to the next or one quarter to the next. So you DON'T say "The U.S. has a real GDP of $14 trillion." You say "The U.S. had *real GDP growth* from 2008 to 2009 of x%." or "2nd quarter the GDP grew by 1.6% annualized" -- with it being understood that REAL GDP growth is what is being measured.

In other words, "REAL" only comes into play when comparing at least two different numbers to each other. GDP for period 1 versus GDP for period 2.

If I do just refer to a single year, for example saying "The US GDP in 2009 was $14 trillion" -- it's just "GDP". It is what it is. It's just one number in isolation. It's not "real" because it is not sensible to correct one number in isolation for inflation. That's like asking me to correct a $10 bill for inflation ... what the heck does that mean?

If you understand that, you would see the need for the deflator. No, Real GDP does not account for inflation. Real GDP growth is a product you get when you take two nominal GDP numbers (year 1 to year 2), and find the growth rate, using the GDP deflator to account for inflation.

You first find the apparent, "nominal" change in economic activity ... then you think, well wait a minute, half of that increase is just due to prices being higher ... so you factor in the deflator to eliminate the affect of inflation.

Hence, *Real GDP growth* tells you the GDP growth, accounting for inflation. But you only got there by using the GDP deflator.