Question

Explain the difference between GDP deflator and inflation rate. Does GDP deflator help us estimate the inflation rate?

Answer 1

Answer:

The GDP price deflator measures the changes in prices for all goods and services produced in an economy. ... The GDP deflator is a more comprehensive inflation measure than the CPI index because it isn't based on a fixed basket of goods.

Answer 2

Answer:

Hey mate here is your answer

Explanation:

After 2009 inflation rate is also calculated on the basis of CPI. ... CPI is computed using a fixed basket of goods, whereas GDP deflator allows the basket of goods to change over time as composition of GDP changes. Price index with changing basket is called paasche index.

This is because an economy's real GDP is calculated by multiplying its current output by its prices from a base year. So, the GDP deflator helps identify how much prices have inflated over a specific time period.

Hope it's helpful for you