It is calculated by summing the market value of all goods and services produced, regardless of whether they are sold domestically or abroad, and then adjusting this value for changes in the price level (inflation or deflation).

Real GDP is usually measured in constant prices, which means that it is expressed in the prices of a base year. This allows economists to compare the value of economic output over time, even if the prices of individual goods and services have changed.

For example, if the nominal GDP of an economy was $1,000 in one year and £1,500 in the next year, but the overall price level increased by 20% between the two years, the real GDP would be adjusted to account for this change in prices.