GDP Deflator

Welcome to another episode of my podcast.

If GDP rise from one year to another, it may be either: 1) the economy is producing more goods and services or 2) goods and services are selling at higher prices. Economist really want to measure the total volume of output of goods and services produced, and not the prices at which these goods and services sell. Economist correct GDP for the effects of inflation,that is, for rising prices. They use the measure of Real GDP and Nominal GDP. The percentage increase in the GDP Deflator from one period to next defines the Rate of Inflation.