When you adjust nominal GDP for price changes (inflation or deflation), you get what is known as the Real GDP. It can be calculated using the following formula:
Real GDP = ∑ pbqt, where b denotes the base year.
To effectively compare the real GDP of two years, one can construct an index using a base year. A base year is usually an arbitrary figure (here, a particular year) which is used as a yardstick for comparison of the GDP numbers.
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