While the prices are going to increase the inflation rate is as well going to increase. This is in short the GDP Deflator. Its work is just to compute the rate at which the inflation in the economy is increasing. It takes into concern all the goods and services that are generated nationally in the economy. Relies on the consumption the GDP Deflator is calculated. It provides an idea of the total value of the goods and services generated in the country. Derivation of GDP Deflator GDP Deflator = (Nominal GDP / Real GDP) X 100 Through using this formula we can come to know the real GDP of the economy. In calculating the GDP Deflator the base year is taken as 100. The main reason for the base year to be taken as 100 is as in that year the inflation was considered as maximum in that year. It provides a rough idea about the prices of the goods and services, if they were increased or decreased. So it becomes simple to calculate the Inflation. Ass
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