Does GDP take into account of inflation?

Discussion in 'Economics' started by poyayan, Sep 3, 2008.

  1. poyayan


    If our GDP is 3.3% and inflation is 5.5%, does that mean we are shrinking?

    Also, if inflation doesn't count food and energy while GDP count food and energy. Isn't that undercount inflation or overcount GDP?

  2. No, inflation is not included. There is a great deal of flexibility given to the government know as the GDP deflator which allows favorable GDP numbers. It can be either positive or negative to support positive GDP growth.
  3. poyayan


    Thanks for the pointer. Yea, the flexible basket thing look interesting.