what is gdp deflator and its use in day to day life
GDP deflator shows the change in the price index between the base year and the current year. That is, it shows the changes in the level of GDP due to a change in the level of prices. Algebraically,
GDP deflator = Nominal GDP / Real GDP ×100
Suppose, in the year 2000, 100 units of the commodity x were produced and the current year price is Rs 20 and the base year price was Rs 10. In this case,
Nominal GDP = 100 ×20 = 2000
Real GDP = 100 ×10 = 1000
GDP deflator = 2000 / 1000 = 2
This value of GDP deflator indicates that the price in the current year is twice that in the base year.