An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

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29 March, 23:34

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

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Morse · Answer 1

GDP Price Deflator

Explanation:

GDP price deflator is a measure of the general changes in the price level of all the finished goods and services in a country in a period. While GDP is a measure of the total output in an economy, the GDP price deflator shows the extent to which prices changed in a period. In proving the effects of price changes, the GDP deflator identifies a base year then compares the current prices to base year prices.

The GDP price deflator allows economists to compare the GDP of different periods while considering the inflation between those periods. It does this by comparing the nominal GDP with the real GDP.