Real GDP is a pretty accurate measure of the output rate in the economy and how that output rate is changing. However, GDP is not a measure of economic welfare.

An economic variable may have both real and nominal values. The nominal value is expressed at current prices and The real value is the value that has been adjusted for the impact of inflation.

There are two types of approaches of measuring GDP, the expenditure approach and the resources approach. Expenditure Approach: GDP is calculated by summing the expenditures on all final goods and services produced. Under this approach, GDP is a measure of aggregate output. Resource Cost-Income Approach: GDP is calculated by summing the income payments to resource suppliers and the other costs of producing those final goods and services Under this approach, GDP is a measure of aggregate income.

The gross domestic product (GDP) is the total market value of final goods and services produced domestically during a specific period, usually 1 year. Final goods are those purchased for final use rather than for resale or further processing. In contrast, intermediate goods are those purchased for resale or for use in producing another good or service.