CALCULATING THE GDP DEFLATOR, THE CHANGE IN THE PRICE LEVEL, AND THE CHANGE IN REAL GDP Assume an economy produces two goods, wine and cheese, in each of two years, 2020 and 2021. What is the GDP deflator for 2021, the percentage change in the price level between 2020 and 2021 , and the percentage change in real GDP between 2020 and 2021 ? GDP deflator for 2021 = Real GDP in 2021 (at 2020 prices) Nominal GDP in 2021
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×100= $65,000
$70,500
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×100=108.46 Percentage change in the price level between 2020 and 2021= GDP deflator in 2020
GDP deflator in 2021− GDP deflator in 2020
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×100= 100
108.46−100
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×100=+8.46% Percentage change in real GDP between 2020 and 2021= Real GDP in 2020
Real GDP in 2021− Real GDP in 2020
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×100= $70,000
$65,000−$70,000
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×100=−7.14%