How Do You Calculate An Inflation Rate Using GDP Deflator?
Inflation is the rise in price over time for a particular product or service. The most common way to calculate inflation is to calculate the percentage change in the CPI, or Consumer Price Index, from one year to the next for a given country. However, you can also calculate the inflation rate using the GDP deflator. The GDP deflator is a figure you calculate by dividing a country’s nominal GDP in a given year by its real GDP. Both GDP figures are reported by the governmental body that analyzes a country’s economic affairs. In the United States, the figures are reported by the Bureau of Economic Analysis in the U.S. Department of Commerce. Select the time span for which you want to calculate a country’s inflation rate. For example, you might want to know the inflation rate from 2005 to 2006. Note the value for the GDP in the earlier year and for the GDP deflator in the later year as reported by the country’s governmental economic affairs body. For example, country A’s GDP in 2005 might
