The GDP deflator is an economics term relating to different ways of looking at a given economy's GDP, or Gross Domestic Product. The GDP is the total value of all the products (often called goods in economics) and services produced in an economy in a defined time period, such as a single year. The GDP deflator is the value determined by comparing a selected GDP to a reference GDP using a special formula. The selected GDP, the one for which a better understanding is desired, is referred to as the Nominal GDP. The GDP being used as a point of reference is referred to as the Real GDP. The GDP deflator value provides insight into the selected GDP by adjusting it for inflation or deflation that may have occurred since the reference year.
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Difficulty:
Moderately Easy
Instructions
1
Determine the value for the GDP you want to compare, the Nominal GDP.
2
Determine the value for the GDP you want to use as a point of reference, the Real GDP.
3
Enter the two values into the GDP deflator formula: GDP deflator value = Nominal GDP divided by Real GDP multiplied by 100.
4
Apply the formula to calculate the GDP deflator value.
Tips & Warnings
The GDP deflator formula only yields valid results if the Real and Nominal GDP values are from the same economy.
