Forex Questions and Answers - FXAnswer

GDP Implicit Price Deflator is a
a ratio of nominal GDP to real GDP expressed as a percentage. The GDP price deflator is used as a measure of the inflation rate; it does not account for price changes in commodity baskets like the Consumer Price Index. Rather, it shows changes in GDP compared with a base year in constant dollar terms.

Farlex Financial Dictionary

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fxpie

1 year ago

Measurement in national accounts
In most systems of national accounts the GDP deflator measures the ratio of nominal (or current-price) GDP to the real (or chain volume) measure of GDP. The formula used to calculate the deflator is:


Dividing the nominal GDP by the GDP deflator and multiplying it by 100 would then give the figure for real GDP, hence deflating the nominal GDP into a real measure.[1]

It is often useful to consider implicit price deflators for certain subcategories of GDP, such as computer hardware. In this case, it is useful to think of the price deflator as the ratio of the current-year price of a good to its price in some base year. The price in the base year is normalized to 100. For example, for computer hardware, we could define a "unit" to be a computer with a specific level of processing power, memory, hard drive space and so on. A price deflator of 200 means that the current-year price of this computing power is twice its base-year price - price inflation. A price deflator of 50 means that the current-year price is half the base year price - price deflation.

Unlike some price indexes, the GDP deflator is not based on a fixed basket of goods and services. The basket is allowed to change with people's consumption and investment patterns.[2] (Specifically, for GDP, the "basket" in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good.) Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices. The advantage of this approach is that the GDP deflator reflects up to date expenditure patterns. For instance, if the price of chicken increases relative to the price of beef, people would likely spend more money on beef as a substitute for chicken. A fixed market basket measurement would miss this change.

In practice, the difference between the deflator and a price index like the Consumer price index (CPI) is often relatively small. On the other hand, with governments in developed countries increasingly utilizing price indexes for everything from fiscal and monetary planning to payments to social program recipients, the even small differences between inflation measures can shift budget revenues and expenses by millions or billions of dollars.

by

Tyce

1 year ago

Current dollar GDP divided by constant dollar GDP. This ratio is used to account for the effects of inflation, by reflecting the change in the prices of the bundle of goods that make up the GDP as well as the changes to the bundle itself

by

Tyce

1 year ago

It’s calculated by dividing the current dollar GDP figure by the constant dollar GDP figure.
Both the GNP and GDP implicit deflators are released quarterly, along with the respective GNP and GDP figures. The implicit deflators are generally regarded as the most significant measure of inflation.

by

Suneetha

1 year ago

In most systems of national accounts the GDP deflator measures the ratio of nominal (or current-price) GDP to the real (or chain volume) measure of GDP. The formula used to calculate the deflator is:

GDP deflator =Nominal GDP/Real GDP x 100


Dividing the nominal GDP by the GDP deflator and multiplying it by 100 would then give the figure for real GDP, hence deflating the nominal GDP into a real measure

by

Harold

1 year ago

Current Dollar GDP divided by constant dollar GDP. This ratio is used to account for the effects of inflation, by reflecting the change in the prices of the bundle of goods that make up the GDP as well as the changes to the bundle itself.

GDP deflator = (Nominal GDP/Real GCP) X 100

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Warren

1 year ago