Why do you have to take out inflation when figuring Real GDP growth rates?

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2026-08-26 13:30

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Inflation measures the general increase in prices over time, which can distort the true economic growth figures. By adjusting for inflation, we obtain Real GDP, which reflects the actual increase in the value of goods and services produced, allowing for a more accurate assessment of an economy's growth. This distinction helps policymakers and economists understand whether an economy is genuinely expanding or merely experiencing rising prices. Thus, removing inflation is essential for evaluating the real performance of an economy.

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