In: Economics
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
GDP deflator: (Nominal GDP / Real GDP) x 100
The percentage change in GDP deflator from one period to another is used to signify inflation.
Whereas, Consumer Price index (used to measure inflation): It measures the change in price of fixed basket of consumer products over a period of time. The percentage change in CPI from one period to another period is measure inflation.
Both are important measures to calculate an increase in price level.
Common difference points between them:
I have uploaded a picture from the website: US Bureau of Labor Statistics, US Bureau of Economic Analysis.
It is showing the trend in both CPI and GDP deflator in US economy over a period of time.