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To calculate the inflation rate using GDP deflator, you can use the following formula:
Inflation Rate = ((GDP Deflator in Year 2 – GDP Deflator in Year 1) / GDP Deflator in Year 1) x 100
To use this formula, you need to find the GDP deflator for the two years you are comparing. The GDP deflator is a measure of the price level of all final goods and services in an economy, and it is calculated by dividing nominal GDP (the total value of goods and services produced in an economy) by real GDP (the value of goods and services produced in an economy adjusted for inflation).
Once you have the GDP deflator for the two years you are comparing, you can plug them into the formula to find the inflation rate between those two years. The result will be a percentage that represents the change in the overall price level between the two years.
The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.
At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.
Download our app and start gaining insight into your current and future finances.
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