DEFINITION of ‘Real Economic Growth Rate’
A measure of economic growth from one period to another expressed as a percentage and adjusted for inflation (i.e. expressed in real as opposed to nominal terms). The real economic growth rate is a measure of the rate of change that a nation’s gross domestic product (GDP) experiences from one year to another. Gross national product can also be used if a nation’s economy is heavily dependent on foreign earnings.
BREAKING DOWN ‘Real Economic Growth Rate’
The real economic growth rate builds onto the economic growth rate by taking into account the effect that inflation has on the economy. The real economic growth rate is a “constant dollar” and is therefore a more accurate look at the rate of economic growth because it is not distorted by the effects of extreme inflation or deflation.