in economics, the gdp deflator (implicit price deflator for gdp) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. gdp stands for gross domestic product, the total value of all final goods and services produced within that economy during a specified period. like the consumer price index (cpi), the 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. 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 with people's consumption and investment patterns. ==calculation== ===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: : \operatorname{gdp\ deflator} = \frac{\operatorname{nominal\ gdp}}{\operatorname{real\ gdp}}\times 100 the nominal gdp of a given year is computed using that year's prices, while the real gdp of that year is computed using the base year's prices. the formula implies that dividing the nominal gdp by the gdp deflator and multiplying it by 100 will give the real gdp, hence "deflating" the nominal gdp into a real measure. 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. this can lead to a situation where official statistics reflect a drop in prices, even though they have stayed the same. consider the example of the computer. from year to year, assume that the price of a new computer stays the same, but the computing power doubles. this would result in a price deflator of 50, though the consumer would have to spend the same amount of money on both systems. unlike some price indices (like the cpi), 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 investme
Index_numbers National_accounts