What is GDP Deflator in macroeconomics Class 12?
Are you looking for, What is GDP deflator and its formula in macroeconomics class 12 as per the syllabus of the CBSE Board.
GDP deflator topic is concerned with the national income accounting chapter of macroeconomics.
It’s a very important topic and a 1 mark or 3 marks question can be formed out of it.
What is GDP Deflator?
In general terms, GDP deflator is the mathematical formula to convert nominal GDP into real GDP and vice-versa. It is also called price index.
It is the ratio of nominal GDP (value of goods and services produces in an economy during a year at current prices) to Real GDP (value of goods and services produces in an economy during a base year)
By this formula, we can obtain Real GDP by eliminating the effect of price changes in Nominal GDP.
Definition of GDP Deflator
“GDP deflator measures the average level of prices of all the goods and services that make up GDP.”
Sandeep Garg
Formula of GDP Deflator
Numerical Example of GDP Deflator
If in 2011, GDP is ₹ 100 crore, and in 2018 it is ₹ 200 crore at the current prices. And, if price index rises from 100 to 400 within the same period, then GDP at current prices is converted into real GDP or GDP at constant prices.
| Year | GDP at Current prices (crores) | Index Numbers or Current Price Index | GDP at Constant Prices (Base Year Prices in crores) |
| 2018 | 200 | 400 | 200*100/400 = 50 |
GDP at Current Price = 200/400*100 = 50 crore
Further Reading:-
| S.N | Topics |
| 1. | What is GDP Deflator |
| 2. | What are externalities in economics |
| 3. | Limitations of GDP as a measure of welfare |
| S.N | Topics |
| 1. | 150+ Numerical of Value Added Method |
| 2. | 150+ Numerical of Income Method |
| 3. | 150+ Numerical of Expenditure Method |
| 4. | 150+ Numerical of National Income and related aggregates |
| S.N | Topics |
| 1. | 250+ MCQs of National Income |
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