Measuring real GDP is complicated due to the need to adjust for inflation and avoid double counting, which requires the use of price indices and a clear definition of final good
One difficulty in measuring real GDP is accounting for inflation. GDP increases can result from either a rise in the level of prices or an actual increase in goods produced. Without an inflation adjustment, we cannot accurately deduce the economic growth. The conversion from nominal to real GDP requires the use of price indices such as the Consumer Price Index (CPI) to adjust for inflation, but choosing the correct index and base year can be challenging.
Another difficulty is avoiding double counting. GDP aims to measure the market value of all final goods and services produced. If intermediate goods are included in this calculation, it can result in an overestimation of the actual production level, thus distorting the real GDP measurement. Differentiating between final and intermediate goods requires a clear understanding of the production process, which can be complex.
Overall, these difficulties require careful consideration when measuring and comparing real GDP across time and different economies.