The GDP deflator is a measure of price inflation within the economy, specifically indicating how much the nominal GDP has increased due to changes in price levels rather than increases in actual output. It connects nominal values, which include inflation effects, to real values that reflect true economic growth by adjusting for price changes, thus providing a clearer view of the economy's health. The deflator also plays a key role in understanding inflation rates and helps to distinguish between various forms of inflationary impacts on economic performance.
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