Answer to Question #59295 in Macroeconomics for Surendra

Question

Can you make recommendation about the proposals on the basis of GDP deflators?

Answer 1

GDP deflator is a measure of price inflation/deflation with respect to a specific base year. The GDP deflator of the base year itself is equal to 100, so the formula for GDP deflator is GDP deflator = Nominal GDP/Real GDP*100. Unlike the CPI, the GDP deflator is not based on a fixed basket of goods and services, the "basket" for the GDP deflator is allowed to change from year to year.