Real gross domestic product
Real gross domestic product (real GDP for short) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e. inflation or deflation). This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output. Although GDP is total output, it is primarily useful because it closely approximates the total spending: the sum of consumer spending, investment made by industry, excess of exports over imports, and government spending. Due to inflation, GDP increases and does not actually reflect the true growth in an economy. That is why the GDP must be divided by the inflation rate (raised to the power of units of time in which the rate is measured) to get the growth of the real GDP. Different organizations use different types of 'Real GDP' measures, for example the United Nations UNCTAD uses 2005 Constant prices and exchange rates while the FRED uses 2009 constant prices and exchange rates, and recently the World Bank switched from 2005 to 2010 constant prices and exchange rates.
Gross domestic product
William Petty came up with a basic concept of GDP to attack landlords against unfair taxation during warfare between the Dutch and the English between 1652 and 1674. Charles Davenant developed the method further in 1695. The modern concept of GDP was first developed by Simon Kuznets for a US Congress report in 1934. In this report, Kuznets warned against its use as a measure of welfare (see below under "limitations and criticisms"). After the Bretton Woods conference in 1944, GDP became the main tool for measuring a country's economy. At that time gross national product (GNP) was the preferred estimate, which differed from GDP in that it measured production by a country's citizens at home and abroad rather than its 'resident institutional units' (see OECD definition above).
The switch from "GNP" to "GDP" in the US was in 1991, trailing behind most other nations. The role that measurements of GDP played in World War II was crucial to the subsequent political acceptance of GDP values as indicators of national development and progress. A crucial role was played here by the US Department of Commerce under Milton Gilbert where ideas from Kuznets were embedded into governmental institutions.