GDP Price Deflator | Formula, Example, & Investing Strategy

15 Jun Investing Strategy

Gold balloon that is deflating from a valve. A large blue circle with white text reads "GDP DEFLATOR," surrounded by smaller blue circles on a light background.

Discounting the effects of inflation.

Suppose you tune into the financial news to hear that the economy’s gross domestic product (GDP) grew by 6.5% last quarter. Sounds like a productivity boom, right? But then you hear those same experts mention the “real GDP” figure, which fell by 1.6%. So what’s going on?

The answer lies in a key measure called the GDP price deflator—a metric that tells you how much of a GDP change is caused by price inflation rather than actual growth in goods and services.

Key Points

Nominal GDP can be misleading, as it conflates real growth with price inflation.
The GDP price deflator…

Source link

GDP Price Deflator | Formula, Example, & Investing Strategy