<blockquote>
<p>The question in another form: Isn't GDP Price Index (GDP Deflator) calculated originally from nominal GDP and real GDP? Why are we recalculating real GDP from nominal GDP and GDP Price Index?</p>
</blockquote>
<p>No, real GDP is not directly observable. What statistical offices do is to measure nominal GDP and deflator (for example from CPI) and then calculate real GDP from nominal GDP and deflator. Real GDP cannot be measured directly from the data that statistical offices collect.</p>
<blockquote>
<p>What I understand from this is 2021 is used as base year, and nominal GDP is converted to real GDP values in graph using &quot;2021 base year GDP Price Index&quot;</p>
</blockquote>
<p>This is correct understanding. They converted nominal GDP to real GDP using price index with base 2021.</p>

CC BY-SA 4.0
2023-12-02T13:14:07.263Z
2023-12-02T13:14:07.263Z
1muflon1
<p>Reading the Economic Report of The President 2023, there is a note under the real GDP graph stating: &quot;<strong>Nominal GDP was converted to 2021 dollars using the GDP Price Index</strong>&quot;
<a href="https://i.sstatic.net/Y9nBy.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/Y9nBy.png" alt="enter image description here" /></a></p>
<p>What I understand from this is 2021 is used as base year, and nominal GDP is converted to real GDP values in graph using &quot;2021 base year GDP Price Index&quot;</p>
<p><strong>What I don't understand though is using GDP price index to calculate real GDP from nominal GDP while originally we have the data of real GDP, and it is used actually to calculate the GDP Price Index</strong>.</p>
<p>The question in another form: Isn't GDP Price Index (GDP Deflator) calculated originally from nominal GDP and real GDP? Why are we recalculating real GDP from nominal GDP and GDP Price Index?</p>

<macroeconomics><gdp><price-index>
What is the meaning of "Nominal GDP was converted to 2021 dollars using the GDP Price Index" in ERP 2023?
Omar
# What is the meaning of "Nominal GDP was converted to 2021 dollars using the GDP Price Index" in ERP 2023?

(Asked by: username_0 on 2023-12-02)

Reading the Economic Report of The President 2023, there is a note under the real GDP graph stating: "**Nominal GDP was converted to 2021 dollars using the GDP Price Index**"
[![enter image description here](https://i.sstatic.net/Y9nBy.png)](https://i.sstatic.net/Y9nBy.png)

What I understand from this is 2021 is used as base year, and nominal GDP is converted to real GDP values in graph using "2021 base year GDP Price Index"

**What I don't understand though is using GDP price index to calculate real GDP from nominal GDP while originally we have the data of real GDP, and it is used actually to calculate the GDP Price Index**.

The question in another form: Isn't GDP Price Index (GDP Deflator) calculated originally from nominal GDP and real GDP? Why are we recalculating real GDP from nominal GDP and GDP Price Index?

**Tags:** macroeconomics, gdp, price-index


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## 1 answers

### Answer by username_1 on 2023-12-02. Score: 0 | Accepted answer

> The question in another form: Isn't GDP Price Index (GDP Deflator) calculated originally from nominal GDP and real GDP? Why are we recalculating real GDP from nominal GDP and GDP Price Index?

No, real GDP is not directly observable. What statistical offices do is to measure nominal GDP and deflator (for example from CPI) and then calculate real GDP from nominal GDP and deflator. Real GDP cannot be measured directly from the data that statistical offices collect.

> What I understand from this is 2021 is used as base year, and nominal GDP is converted to real GDP values in graph using "2021 base year GDP Price Index"

This is correct understanding. They converted nominal GDP to real GDP using price index with base 2021.


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