Learn about the Difference between the term Deflator and Deflation?
What is GDP Deflator?
The GDP Deflator is calculated as the ratio of the Nominal GDP associated with current price levels, to the Real GDP that is adjusted for historical price changes.
What the Difference Between GDP Deflator and Inflation Rate
Both the GDP Deflator and Inflation Rate measures the historical trend of price increases for a country.
Inflation rate is calculated using the Consumer Price Index (CPI) which is the difference in price value based on predefined basket of goods & services. Unlike the CPI, the GDP Deflator is not based on predetermined mix of goods and services. The GDP deflator's basket of goods and services is based on the total aggregate consumption and investment pattern of the country's people.This means that changing consumption habits will show up in the deflator but not in the CPI.
- World Economic Outlook Database October 2010
Here's the most updated data from the IMF's World Economic Outlook Database.
Why is the GDP Deflator An Important Figure?
Historically the difference between the Consumer Price Index (CPI) and the GDP Deflator is very small. However if any government were to try and manipulate the CPI to show an artificially low Inflation Rate, then difference between CPI and Deflator should theoretically become larger.
More by this Author
Do you love the film "Malena" starring Monica Bellucci and by Director Giuseppe Tornatore? Then you will definitely enjoy this list of movies like "Malena".
Here's the definitive list of movies like Troy with their sweeping epic scope and blood spilling heroic battles, interweaves with stories of love, lust and romance.
In today's volatile economy it pays to be well informed. Read on to know the key causes of China's inflation and the insider secrets of China's economy.
Share Your Thought about the GDP Deflator
No comments yet.