What is GDP Deflator in macroeconomics Class 12?

Share your love

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.

Table of Contents

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

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.

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

Further Reading:-

Share your love
Anurag Pathak

Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his youtube channel and can download the Android & ios app for free lectures.

Articles: 2015

One comment

1. Lalit sahariya

It is very helpful for students
Thank you sir

close

Ad Blocker Detected!

Our Website is made possible by displaying online advertisements to our visitors. Please consider supporting us and remove the AD - Blocker to read this article.