GDP deflator

In economics, the GDP deflator is a price index measuring changes in prices of all new, domestically produced, final goods and services in an economy. GDP stands for gross domestic product, the total value of all goods and services produced within that economy during a specified period.

The GDP deflator is not based on a fixed market basket of goods and services. The basket is allowed to change with people's consumption and investment patterns. Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices.

A simple GDP deflator formula goes like this: