# How to Calculate Annualized GDP Growth Rates

Three Methods:Learn to calculate the GDP to determine the gross domestic product minus the value of imports.Learn how to calculate the annualized rate of growth in the GDP to see the comparative growth or decline in the GDP compounded over a period of time.Learn how to calculate the annualized rate of growth in the GDP to see the comparative straight-line growth or decline in the GDP over a period of 1- year.

The Gross Domestic Product (GDP) is a central index of a country or region's economic position. It measures the total output which is all the goods and services produced by an economy. Because it measures the current market prices during a given period of time (typically a quarter or a year), it is considered to be the nominal GDP. Very specifically, the GDP is the current value of everything produced and provided in an economy. This includes all government spending on people, things and programs. It includes all consumer spending plus all investments and the value of all exports - minus the economy's imports. While this is a very layered calculation, the GDP is so much a part of economic and political news that it is valuable to know how to calculate annualized GDP growth rates.

## Steps

### Method 1 Learn to calculate the GDP to determine the gross domestic product minus the value of imports.

- 1
**Follow this formula:**GDP = CS + CI + GS + NX.- In this formula, CS stands for all consumer spending, every penny that households have spent on durable and non-durable goods and services, for example, appliances, clothing, and health care.
- CI equals the money spent on capital investments, inventories, equipment, construction, etc.
- GS refers to total spent by the government on everything from airplanes to payroll.
- Finally, NX stands for net exports, that is, the currency difference between money spent on the economy's goods by foreign economies and the money spent by the domestic economy on a foreign economy's goods.

### Method 2 Learn how to calculate the annualized rate of growth in the GDP to see the comparative growth or decline in the GDP compounded over a period of time.

- 1
**Follow this formula:**% rate of growth in GDP = 100 * X, where X is the solution of VB * (1 + X) ^ N = VE.- Here, VB equals the good or service at the beginning of the valued period.
- N is the number of periods between the VB and the VE, usually quarters or years.
- VE refers to the value of goods and services at the end of the valued period.

- 2
**Solve for X, a decimal/percentage that will be the rate of annualized growth where there is predictably and reliably forward growth.**

### Method 3 Learn how to calculate the annualized rate of growth in the GDP to see the comparative straight-line growth or decline in the GDP over a period of 1- year.

- 1
**Follow this formula:**GR = (1/N) X (VE - B) / B.- Here, GR equals the rate of annualized growth in the GDP without compounding.
- N is the number of years or quarters between the beginning and the end of the growth (or decline).
- VE refers to the value at the end of the period.
- VB is the value at the beginning.
- This is the least valued formula in that, while it has descriptive value, it ignores the fact of compounding.

## Tips

- There is a difference between real and nominal GDP in that the nominal GDP describes the sum total of goods and services at current prices and the real GDP refers to the use of constant prices.
- Other formulas are used by economists to measure growth retroactively.

## Things You'll Need

- Multifunction calculator
- Spreadsheet software

## Article Info

Categories: Economics