Economics Gdp Questions
The difference between GDP and GNP deflator GDP deflator lies in the measures they use to calculate the overall price level in an economy.
GDP deflator is a measure of the average price level of all final goods and services produced within a country's borders. It takes into account the prices of all goods and services produced domestically, regardless of whether they are produced by domestic or foreign factors of production. It is calculated by dividing the nominal GDP (the total value of all goods and services produced at current prices) by the real GDP (the total value of all goods and services produced at constant prices).
On the other hand, GNP deflator is a measure of the average price level of all final goods and services produced by the residents of a country, regardless of where they are located. It includes the income earned by domestic factors of production from abroad and excludes the income earned by foreign factors of production within the country. It is calculated by dividing the nominal GNP (the total value of all goods and services produced by the residents of a country at current prices) by the real GNP (the total value of all goods and services produced by the residents of a country at constant prices).
In summary, GDP deflator measures the overall price level of goods and services produced within a country's borders, while GNP deflator measures the overall price level of goods and services produced by the residents of a country, regardless of their location.