GDP Deflator Definition and Formula

This post will help you know the GDP deflator definition and its formula. Check out this useful info provided by our best writers from help with economics assignment services today and learn what it is and what its formula is here.

gdp deflator definition

Short History about GDP Deflator Definition

GDP Deflator is a tool to get your price inflation. GDP means Gross Domestic Product. This is the overall value of the final goods and services made and produced with an economy for a particular period of time. The GDP Deflator is where the level of prices is known whether the goods and services are new, produced domestically or final in an economy.

General Information about the Term

The GDP deflator is based on the GDP Index, which is quite the same to changes in the Consumer Price Index. The latter has a different way to measure inflation. The GDP deflator serves as a price index for the measurement of inflation and deflation using the formula that will be discussed later. The GDP deflator is the same as CPI in a way that it is a measure of price of either inflation or deflation with regard to a particular base year. The GDP deflator base year is equivalent to 100. Remember these things as well as about the GDP index mentioned earlier for easy understanding.

gdp deflator definition and formula

Explanation and Deflator Formula

GDP deflator is a metric to estimate the consequences of inflation on the economy. There is a GDP change if there is an impact of inflation on a good or service through the conversion of the output in the economy into present prices. The GDP Deflator will able to help you discover the changes in the economy’s consumption or the investment pattern. Your GDP deflator is calculated this way, get the product of your Nominal GDP over your Real GDP. Afterwards, you multiply you’re the product by 100. The deflator formula needs the Nominal GDP, the Real GDP, and the base year.

gdp index formula

  • Nominal GDP is unadjusted for inflation. It is the market value of the produced goods and services in an economy. If there is no inflation, the Nominal GDP is the equivalent of Real GDP.
  • Real GDP is the adjusted inflation. It is actually a Nominal GDP but only adjusted as to see the changes in the real output.
  • 100 representing the base year of the GDP Deflator

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