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It is calculated by dividing nominal gross domestic product GDP by real GDP and multiplying it with 100. Nominal GDP refers to the market value of goods and services before getting the inflation impact.
One of the benefits of using GDP is it shows growth (or lack of growth) in the economy during a particular time duration. It is measured by the current price, and it does not measure the real GDP.
The price depends on the money supply that can vary independently of GDP from one year to another. Prices change from one year to another; hence, GDP changes every year.
The price change is represented every year by the adjusted value of GDP, where the price rise inflates the GDP and fall deflates it.
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