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To calculate the inflation rate from GDP, you can use the GDP deflator. The GDP deflator is a measure of the price level of all goods and services included in GDP. It’s calculated by dividing nominal GDP (the value of all goods and services produced in an economy using current prices) by real GDP (the value of all goods and services produced in an economy using constant prices).
To calculate the inflation rate from the GDP deflator, you can use the following formula:
Inflation rate = ((GDP deflator in current year – GDP deflator in previous year) / GDP deflator in previous year) x 100
For example, if the GDP deflator in the current year is 110 and the GDP deflator in the previous year is 100, the inflation rate would be ((110 – 100) / 100) x 100 = 10%. This means that prices have increased by 10% from the previous year.
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.
