A broad measure of the price level for the whole economy, calculated as the ratio of nominal GDP (at current prices) to real GDP (at constant prices), and used to convert between the two.
- Formula: GDP deflator equals (nominal GDP divided by real GDP) multiplied by 100; it shows how much of nominal growth is due to higher prices rather than more output.
- Unlike the CPI or WPI, which use a fixed basket, the deflator covers every good and service counted in GDP, so it is the most comprehensive price index.
- Its basket is not fixed; it changes each year with the composition of output, which distinguishes it from the consumer and wholesale price indices.
- It is an implicit price index, derived from the national-income accounts rather than collected separately; see concept gdp and gnp.
- The deflator-based inflation rate can differ from CPI or WPI inflation because of the wider coverage and changing weights.
The definition (nominal over real GDP) and the contrast with CPI and WPI (broadest coverage, not a fixed basket) are testable national-income facts.
The GDP deflator (nominal divided by real GDP, covers all goods and services) is broader than the CPI or WPI; it uses a changing basket, not a fixed one.
Nominal GDP divided by real GDP, times 100; the broadest, economy-wide price index, with a changing basket.