Calculate the GDP deflator
Understand the Problem
The question is asking us to calculate the GDP deflator, which is an economic measure that reflects the level of prices of all new, domestically produced final goods and services in an economy. We will typically require nominal GDP and real GDP values to compute the deflator using the formula: GDP Deflator = (Nominal GDP / Real GDP) x 100.
Answer
133.33
Answer for screen readers
To calculate the GDP deflator, use the formula: GDP Deflator = (Nominal GDP / Real GDP) x 100. For example, if the Nominal GDP is 200 billion and the Real GDP is 150 billion, the GDP Deflator would be 133.33.
Steps to Solve
- Identify the Nominal GDP and Real GDP
Nominal GDP is the value of all finished goods and services within a country's borders at current prices, while Real GDP is the value of all finished goods and services at constant prices.
- Apply the GDP Deflator formula
Use the formula below to calculate the GDP Deflator:
$$ \text{GDP Deflator} = \left( \frac{\text{Nominal GDP}}{\text{Real GDP}} \right) \times 100 $$
- Calculate the result
Divide Nominal GDP by Real GDP, then multiply by 100 to get the percentage value.
Example: If Nominal GDP = 200 billion and Real GDP = 150 billion, the calculation would be as follows: $$ \text{GDP Deflator} = \left( \frac{200}{150} \right) \times 100 = 133.33 $$
To calculate the GDP deflator, use the formula: GDP Deflator = (Nominal GDP / Real GDP) x 100. For example, if the Nominal GDP is 200 billion and the Real GDP is 150 billion, the GDP Deflator would be 133.33.
More Information
The GDP deflator is an important tool used to measure the impact of inflation on GDP over time. It helps economists differentiate between nominal and real economic growth.
Tips
A common mistake is to mix up Nominal GDP and Real GDP. Remember, Nominal GDP is measured using current prices, whereas Real GDP is adjusted for inflation.
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