The Current Dollar GDP is a means of understanding the most recent calculation of the Gross Domestic Product (GDP) in terms of current year dollars. Sometimes referred to as Real GDP, the process involves beginning with the Nominal GDP and converting the total into a number that reflects the prices associated with a base year. One qualification about this process is that it specifically controlled so that it excludes the impact of inflation from one calendar year to the next.

In order to arrive at the current dollar GDP, it is necessary to take the Nominal GDP and divide it by a component that is known as the GDP Deflator. Essentially, the deflator works as a mechanism to extract the rate of inflation from the final figure. By doing so, it becomes possible to understand GDPs in terms that are real or current dollars.

One of the values of calculating a Current Dollar GDP is that it becomes possible to compare changes in prices in a very real way. By removing the impact of inflation from the process, consumers can understand if there has been any real increase in the actual unit price for a given product, rather than just an apparent increase. This can help both economists and consumers understand what is actually happening within the economy, and predict upcoming trends based on the data.

In practical terms, the main factor is determining the rate of the GDP deflator. This will involve analyzing the rate of inflation, as well as considering some other economic indicators. One the amount of the deflator is affirmed, it is possible to apply the rate to the Nominal GDP and come up with Current Dollar GDP for the period cited.

As an illustration, if the Nominal GDP for a nation comes to a total of a ten million dollars and the GDP deflator is understood to be 5%, that will mean a current dollar adjustment of $500,000.00 US Dollars (USD). Allowing for this economic adjustment, the Current Dollar GDP will come to a total of $9,500,000.00 USD.