How this calculator works
The growth rate compares one period's output with the period before it. Quarter-over-quarter rates are often shown at an annualized rate, while year-over-year rates compare the same quarter in consecutive years to remove seasonal patterns. Real GDP growth, which this formula gives when both figures are in constant dollars, is the usual measure of economic expansion. Nominal growth also includes price changes, so it overstates volume growth when prices rise.
Formula
Growth rate = (GDP current - GDP previous) / GDP previous, displayed as a percentage. Current GDP = previous GDP × (1 + growth), and previous GDP = current GDP / (1 + growth). The absolute change is simply GDP current - GDP previous.
Worked example
GDP rising from $2,000 to $2,100 gives growth of $100, or 5%. A fall from $2,100 to $2,000 gives -4.7619%, because the earlier, larger figure is the base of the percentage.
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Frequently asked questions
Is a 5% rise the same as a 5% fall back?
No. Rising from 2,000 to 2,100 is 5%, but falling from 2,100 back to 2,000 is 4.7619%. Each percentage uses its own starting value as the base.
How do I annualize a quarterly growth rate?
Raise 1 plus the quarterly rate to the fourth power and subtract 1. Multiplying the quarterly rate by four is a rough approximation that overstates the annual figure.
Should I use nominal or real GDP?
Use real GDP to measure how much more the economy produced. Nominal GDP growth mixes volume changes with price changes and can be positive even when output falls.