What is the GDP deflator and how could be used to measure inflation

Solutions

Expert Solution

The GDP deflator is a scale of inflation. GDP deflator is the ratio of value of services and goods produced in an economy in a particular year at current prices to that of prices that persist in the the base year. The GDP deflator is also known as implicit price deflator.

The GDP deflator helps to determine the growth in th GDP product has occurred on account of higher prices instead of increase in output.

This is a more inclusive measure of inflation. Because the deflator covers the whole range of goods and services produced in an economy.

The difference between the real GDP and nominal GDP is measured by the GDP price deflator. Nominal GDP doesn't include inflation while the real GDP includes inflation. In a growing economy the nominal GDP would be higher than the real GDP.

The formula to find GDP price deflator is :

GDP price deflator = (nominal GDP/real GDP) x 100

PLEASE GIVE AN UP VOTE IF YOU ARE SATISFIED WITH MY ANSWER. LEAVE FEEDBACK IN THE COMMENT BOX. THANK YOU!

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The GDP deflator Multiple Choice Is the best measure of inflation for consumers. Is the broadest...

The GDP deflator Multiple Choice Is the best measure of inflation for consumers. Is the broadest price index, covering all output. Reflects the price changes felt by producers but not consumers. Is the price index based on a fixed basket of goods and services for the government.

Year Nominal GDP Economic Growth Workers GDP Deflator Capital Population CPI M1 Inflation (with GDP Deflator)...

Year Nominal GDP Economic Growth Workers GDP Deflator Capital Population CPI M1 Inflation (with GDP Deflator) 2019 $22,000,000 2.10% 100 110 20,000,000 200 300 $4,000,000 1.10% 2069 $384,000,000 2.80% 150 320 60,000,000 300 1200 $40,000,000 2.90% From the numbers in the table, and your last question, what led to the increase in real per capital GDP between 2019 and 2069. Was it an increase in the fraction of the population working, growth in labor productivity, or a combination of both...

Describe the difference between the GDP Deflator and CPI. Be sure to discuss what they measure,...

Describe the difference between the GDP Deflator and CPI. Be sure to discuss what they measure, how one could get an inflation rate from them, and which measure is more relevant to you and why? must be atleast 100 words

In 2019, the annual inflation rate in the U.S. based on the GDP deflator was 1.8%,...

In 2019, the annual inflation rate in the U.S. based on the GDP deflator was 1.8%, while the inflation rate based on Personal Consumption Expenditures (PCE) deflator was 1.5%. Provide two possible explanations for this difference between the inflation rates calculated from the GDP deflator vs the PCE deflator?

Macro Economics As the percentage change in the GDP deflator and inflation are both measures of...

Macro Economics As the percentage change in the GDP deflator and inflation are both measures of changes in price levels, what is there a difference between them. with help pg graph

what are the differences between GDP deflator, inflation and price index? I would like to know...

what are the differences between GDP deflator, inflation and price index? I would like to know more about in detail

What is the GDP deflator in year 1?

YearQuantity xPrice xQuantity yPrice yPopulationEmployedUnemployedNot LookingCPI140,000$455,000$121,9251,57553263118241,500$4.3056,100$12.252,0301,62870289123341,200$4.5056,000$12.402,1881,750114298125What is the GDP deflator in year 1?Calculate the real GDP growth rate between years 2 and 3.What is real GDP per capita in year 3?What is the unemployment rate in year 2?What is the labor force participation rate in year 1?What is the inflation rate, as measured by the CPI between years 1 and 2?

Explain the following well: • GDP deflator • CPI • PPI (WPI) • Inflation (and calculation...

Explain the following well: • GDP deflator • CPI • PPI (WPI) • Inflation (and calculation method) • Linkage (formula) among nominal GDP, real GDP, and GDP deflator • Base year. • How do economists calculate the GDP deflator? Knowing the GDP calculator and Nominal GDP, how do they calculate the real GDP figures? • Explain and distinguish clearly the difference between nominal GDP and real GDP. Offer a clear numerical example to contrast the two better. • In the...

A) Compare the different measures of inflation known as GDP deflator, the Producer Price Index and...

A) Compare the different measures of inflation known as GDP deflator, the Producer Price Index and explain how to calculate the real interest rate. B) Frictional unemployment and the natural rate of unemployment also seem to depend on the age distribution of the population. Describe why this is so.

Part B. Price Indexes and Inflation The CPI (consumer price index) and PGDP (GDP Deflator, GDP...

Part B. Price Indexes and Inflation The CPI (consumer price index) and PGDP (GDP Deflator, GDP price index) have the following values. Year CPI (1982-84 = 100) PGDP (2012 = 100) 2019 256 112 2020 258 113 The CPI figures are for the month of June. The GDP Deflator figures are for the second quarter of the year. B1. Why is the level of the CPI higher than that of the GDP deflator, that is, in the 250s rather than...

Subjects