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How do you calculate inflation rate using GDP deflator?

The GDP deflator measures price inflation by dividing the nominal GDP by the real GDP, and then multiplying that figure by 100. The result is a measure of an economy's inflation or deflation.

What exactly does the GDP deflator measure?

The GDP deflator is a measure of the change in the annual domestic production due to change in price rates in the economy and hence it is a measure of the change in nominal GDP and real GDP during a particular year calculated by dividing the Nominal GDP with the real GDP and multiplying the resultant with 100.

What is the correct formula for calculating the GDP?

The following equation is used to calculate the GDP: GDP = C + I + G + (X – M) or GDP = private consumption + gross investment + government investment + government spending + (exports – imports). Nominal value changes due to shifts in quantity and price.