# What is the GDP deflator, and how it is calculated

gross domestic product - it's probably the most important of all macroeconomic indicators to judge the results of economic activities in the country specifically designated period of time.It represents the total volume of goods produced and services provided by residents of a particular state.In order to bring this figure in a comparable form, economists expect the GDP deflator, which makes it possible to trace the dynamics of the number of periods in a constantly changing the level and structure of prices.This index is a generalized measure of the current inflation, because always attracts the attention of many experts.

Determination

GDP deflator - a special price index, created to determine the total level of prices for goods and services (market basket) over a specific, one period.It allows you to calculate the change in the real volume of goods produced in the country.Usually it is the calculation of the departments involved in official statistics, in Russia this question is responsible Federal State Statistics Service.

Basic properties

When calculated the GDP deflator, take into account absolutely all the goods and services that are included in the GDP of the country.Imported goods in determining this figure excluded.Unlike the Consumer Price Index, this index (GDP deflator) is based on the value of the consumer basket of the year, while the CPI is used for the base period.If during the period of calculation has been made any new product, it also falls into the composition of this index.

calculation and correlation formulas

GDP deflator - is the ratio of the nominal value of GDP (Nominal GDP), expressed in market prices of the current period (usually take one year), real GDP (Real GDP), which is defined in pricesthe base year.As a rule, the result is multiplied by 100 m. E. Converted to a percentage.Thus, its formula can be represented as follows:

GDP deflator = (Nominal GDP value / Real GDP value) x 100%.

Nominal GDP is calculated using several methods: expenditure (production method), income (distribution method) and value added.Most often use the first option, which involves the use of a formula:

GDP = PH + I + T + HFI SE where

RN - expenses of the population;

HFI - gross private investment;

T - public procurement;

Jae - net exports (difference between export and import).

addition, expect the price index of the reporting year (period), which is needed to calculate real GDP:

price index of the current period = current period Prices / Prices of the base period.

Dividing him the nominal domestic product, we obtain terms of value of the national product at constant prices.It is easy to notice the price index, in fact, is the GDP deflator.Therefore, it is often used to find it such a formula:

GDP deflator = Σ (Qt x Pt) / Σ (Qt x P0), where

Qt - the volume of production of the reporting period in real terms;

Pt - the price of goods (service) in the reporting year;

P0 - price of goods (service) in the base year.

resulting index has another name - the Paasche price index.If the value is greater than one, this means that the inflation of the economy grows, and if less - falls.