# How to calculate GDP Deflator

Scenario: A country produces only X and Y; their outputs last year and this year are given in the table below. Calculate the GDP deflator.

Applying our GDP Deflator formula...

GDP Deflator = (Nominal GDP / Real GDP) * 100

We can calculate Nominal GDP with the following function:

Nominal GDP = (Qx{this year} * Px{this year}) + (Qy{this year} * Py{this year})

We can plug in the following price values for "this year"...

...like so...

Nominal GDP = (Qx{this year} * Px{this year}) + (Qy{this year} * Py{this year})
Nominal GDP = (Qx{this year} * \$30) + (Qy{this year} * \$20)

...and the following quantity values for "this year"...

...like so...

Nominal GDP = (Qx{this year} * Px{this year}) + (Qy{this year} * Py{this year})
Nominal GDP = (120 * \$30) + (80 * \$20)

...resulting in a nominal GDP of \$5200!

Nominal GDP = (Qx{this year} * Px{this year}) + (Qy{this year} * Py{this year})
Nominal GDP = (120 * \$30) + (80 * \$20)
Nominal GDP = (\$3600) + (\$1600)
Nominal GDP = \$5200

We can plug this nominal GDP in like so:

GDP Deflator = (Nominal GDP / Real GDP) * 100
GDP Deflator = (\$5200 / Real GDP) * 100

We can calculate Real GDP with the following function:

Real GDP = (Qx{this year} * Px{base year}) + (Qy{this year} * Py{base year})

We can plug in the following price values for "base year"...

...like so...

Real GDP = (Qx{this year} * Px{base year}) + (Qy{this year} * Py{base year})
Real GDP = (Qx{this year} * \$20) + (Qy{this year} * \$15)

...and the following quantity values for "this year"...

...like so...

Real GDP = (Qx{this year} * Px{base year}) + (Qy{this year} * Py{base year})
Real GDP = (120 * \$20) + (80 * \$15)

...resulting in a Real GDP of \$3600!

Real GDP = (Qx{this year} * Px{base year}) + (Qy{this year} * Py{base year})
Real GDP = (120 * \$20) + (80 * \$15)
Real GDP = (\$2400) + (\$1200)
Real GDP = \$3600

We can plug this in like so:

GDP Deflator = (Nominal GDP / Real GDP) * 100
GDP Deflator = (\$5200 / \$3600) * 100

GDP Deflator = (Nominal GDP / Real GDP) * 100
GDP Deflator = (\$5200 / \$3600) * 100

...we get a value of 144.4!

GDP Deflator = (Nominal GDP / Real GDP) * 100
GDP Deflator = (\$5200 / \$3600) * 100
GDP Deflator = (\$5200 / \$3600) * 100
GDP Deflator = (1.444) * 100
GDP Deflator = 144.4