What Is the GDP Price Deflator and Its Formula?

What Is the GDP Price Deflator? The gross domestic product (GDP) price deflator is a formula that measures the amount to which the real value of an economy's total output is reduced by inflation. The GDP deflator formula takes into account the value of all final goods including exports. It does not factor in the prices of imports. The GDP deflator formula is used by the Bureau of Economic Analysis (BEA). It helps economists track more accurately how the economy is faring over time while taking inflation into account.Key TakeawaysGDP measures the market value of all goods and services produced in an economy.The GDP price deflator measures the changes in prices of all the goods and services produced in an economy.Using the GDP price deflator helps economists compare the levels of real economic activity from one year to the next.The GDP price deflator is a more comprehensive inflation measure than the Consumer Price Index (CPI), which measures the price changes in a fixed basket of goods....