How to calculate GDP deflator with base year?
Understand the Problem
The question is asking for a method to calculate the GDP deflator using a base year as a reference. The GDP deflator is an economic metric that reflects the changes in price levels of all new, domestically produced goods and services in an economy. Typically, it is calculated by taking the ratio of nominal GDP to real GDP and multiplying by 100, while taking the base year into account for the calculation.
Answer
Nominal GDP / Real GDP * 100
The final answer is Nominal GDP / Real GDP * 100
Answer for screen readers
The final answer is Nominal GDP / Real GDP * 100
More Information
The GDP deflator is an economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. It provides a broader measure of inflation than the Consumer Price Index (CPI) because it includes all goods and services produced domestically.
Tips
A common mistake is confusing the GDP deflator with the CPI, which only considers consumer goods and services, not all domestic production.
Sources
- How to Calculate the GDP Deflator - Investopedia - investopedia.com
- The CPI and the GDP Deflator - AP/IB/College - ReviewEcon.com - reviewecon.com
- GDP Deflator - Wikipedia - en.wikipedia.org
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