Nominal GDP counts prices as well as output
Nominal GDP values everything produced in a period at the prices of that period. If an economy produces exactly the same goods as last year but every price is 3% higher, nominal GDP rises by 3% although nothing more was made. Real GDP holds prices fixed so that it moves only when the quantity of output moves.
The ratio of the two is the GDP deflator, a price index for everything the economy produces: deflator = nominal GDP ÷ real GDP × 100. Turn it around and real GDP is nominal GDP divided by the deflator, times 100.
The deflator method, with this year's US figures
In the second quarter of 2026, US nominal GDP ran at an annual rate of $32,486.1 billion and the GDP deflator stood at 133.855, with 2017 = 100. Dividing gives real GDP of $24,269.6 billion in 2017 dollars — the figure the Bureau of Economic Analysis publishes, to rounding.
The difference, about $8.2 trillion, is not missing output: it is the rise in the prices of US output since 2017. The real GDP calculator runs the same division for any nominal figure and index.
Worked example
Nominal = 32,486.1, deflator = 133.855
Real = 32,486.1 ÷ 133.855 × 100
Real = 24,269.6 ($ billions, 2017 prices)
The base-year method: value this year's quantities at old prices
Without a price index, real GDP comes straight from quantities. Take three goods: 1,000 loaves at $2.50 (they cost $2.00 in the base year), 300 shirts at $11 (base $10), and 80 phones at $24 (base $25). Nominal GDP values them at this year's prices; real GDP at the base year's.
Nominal GDP is 2,500 + 3,300 + 1,920 = 7,720; real GDP is 2,000 + 3,000 + 2,000 = 7,000; the implied deflator is 7,720 ÷ 7,000 × 100 = 110.3. Prices are about 10% above the base year overall, even though one of the three goods became cheaper.
Worked example
Nominal = 2.5×1,000 + 11×300 + 24×80 = 7,720
Real = 2×1,000 + 10×300 + 25×80 = 7,000
Deflator = 7,720 ÷ 7,000 × 100 = 110.3
The base year changes the growth rate
Which year's prices you use is not a neutral choice. Goods whose prices have fallen fast — computers are the classic case — tend to be the ones whose quantities have grown fastest. Valued at old, high prices, their growth gets a large weight and total real growth looks faster; valued at new, low prices, it looks slower.
So a fixed-base series drifts: the further you move from the base year, the more it overstates growth when relative prices have changed. Rebasing a fixed-weight series to a new year leaves past growth rates unchanged. Rebasing can change measured growth for years well before the new base.
Chained dollars solve the drift
Since 1996 the United States has measured real GDP with chain-type indices. Instead of one base year for all time, each year's growth is computed using prices from both that year and the one before, and the yearly growth rates are chained together. The reference year — currently 2017 — only sets the units, which is why the series is quoted in chained 2017 dollars.
The price of chaining is that real components no longer add up exactly to real GDP, and chained dollars should not be summed across components. For shares of output, use nominal figures; for growth, use the chained series.
Deflator or CPI: which index belongs in the division
The GDP deflator covers everything produced at home, including investment goods, government services and exports, and excludes imports. The consumer price index covers a basket of consumer purchases, including imported ones, and nothing else.
Dividing nominal GDP by the CPI gives output measured in consumer purchasing power — useful for some comparisons, but not official real GDP. The two indices diverge when import prices, investment-goods prices or government pay move differently from consumer prices.
Common mistakes
Dividing by the deflator without multiplying by 100.A deflator of 133.9 is an index; the division needs 1.339, so multiply the result by 100.Comparing nominal GDP across years as if it were output.A 5% rise in nominal GDP with 3% inflation is about 2% real growth, not 5%.Using the CPI and calling the result official real GDP.The official measure uses the GDP deflator's chained prices.Adding chained-dollar components.In a chained series, real consumption plus real investment and so on does not equal real GDP exactly.