# [[gdp|GDP]] Deflator GDP uses market prices as measure sticks, which has many drawbacks: - Prices may not exist, e.g. government revenue, which is assumed to be equal to cost - Prices may not be a good yardstick, e.g. monopoly prices - Prices can change over time Solution: fix the price in an arbitrary *base year*. - Implicit GDP Deflator = Nominal GDP \/ Real GDP × 100 - Chain-weighted GDP deflators - [[inflation|Inflation]] rate = growth factor of GDP deflator − 1 = growth rate of GDP deflator Underestimation of real GDP growth means overestimation of [[inflation]], and vice versa.