How to Calculate Real GDP Deflator

Calculating GDP Deflator provides an idea of a nation's inflation.

The Gross Domestic Product Deflator is a conversion factor to convert Real GDP to Nominal GDP or Nominal GDP to Real GDP. The GDP Deflator shows if an economy underwent inflation or deflation during the year. Economists use the GDP Deflator to convert current market prices into constant prices over time.

Difficulty:

Easy

Instructions

1. Access Gross Domestic Product tables from the US Department of Commerce, Bureau of Economic Analysis for United States GDP. These tables provide Real GDP and Nominal GDP. For example, Quarter 1 of 2009 had a Nominal GDP of 14,178 and a Real GDP of 12,925.4.

2. Divide the Nominal GDP by the Real GDP of the economy. In our example, 14,178 divided by 12,925.4 equals 1.09691.

3. Multiply the number calculated in Step 2 by 100 to determine the GDP Deflatior. In our example, 1.09691 times 100 equals a GDP Deflator of 109.691.

References

• Bureau of Economic Analysis: National Income and Product Accounts Tables
• Cliff Notes: Economics - Nominal GDP, Real GDP, and Price Level
• Investopedia: CFA Level 1 - Macroeconomics