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The GDP Deflator

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The GDP Deflator
The GDP Deflator
In economics, it's helpful to be able to measure the relationship between nominal GDP (aggregate output measured at current prices) and real GDP (aggregate output measured at constant base year prices). To do this, economists have developed the concept of the GDP deflator. The GDP deflator is simply nominal GDP in a given year divided by real GDP in that given year and then multiplied by 100.

(Note to students: Your textbook may or may not include the multiply by 100 part in the definition of GDP deflator, so you want to double check and make sure that you are being consistent with your particular text.)

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