GDP Deflator - Formula, Calculation and Importance

What is the GDP Deflator?DefintionThe GDP deflator is a price index that is used to measure the change in the price level of all the goods produced in a country over a period of time.In simple words, the GDP deflator is used to convert nominal GDP, which is the GDP measured at current prices, to real GDP, which is the GDP measured at base year prices or constant prices. By doing so, the GDP deflator helps to eliminate the impact of inflation or deflation on the economy's growth rate.ExplanationThe Gross Domestic Product (GDP) is a measure of the total value of all final goods and services produced (total output) within the geographic boundaries of a country in one year. GDP is a key measure of economic activity, but it can be affected by changes in prices over time. The GDP deflator is an important tool that economists use to adjust for these price changes and accurately measure the growth of an economy.In simple words, the GDP deflator is used to convert nominal GDP, which is the GDP...