What is GDP Deflator in macroeconomics Class 12?

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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.

YearGDP at Current prices (crores)Index Numbers or Current Price IndexGDP at Constant Prices (Base Year Prices in crores)
2018200400200*100/400 = 50

GDP at Current Price = 200/400*100 = 50 crore

Further Reading:-

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1.What is Macroeconomics
2.What are Goods in economics
3.What are Consumption Goods
4.What are capital goods
5.What are intermediate Goods
6.What is intermediate consumption
7.What are final Goods
8.What is Final Consumption
9.What is investment in economics
10. What is stock and flow
11.What are transfer payments
12.What is circular flow of income
13.What is Domestic Territory of a Country
14.What is normal resident of a country
15.Nominal GDP and Real GDP
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1.What is GDP Deflator
2.What are externalities in economics
3.Limitations of GDP as a measure of welfare
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1.Items to be included in National income
2.Items to be included in Domestic Income
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1.National Income and Related Aggregates, formula, Definition, process
2.Value added Method, formula, Definition, process
3.Income Method, formula, Definition, process
4.Expenditure Method, formula, Definition, process
5.
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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
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1.250+ MCQs of National Income
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Articles: 2015

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