Definition: Deflator

Category: U.S. Bureau of Labor Statistics

Value that allows data to be measured over time in terms of some base period; or, in more obscure terms, an implicit or explicit price index used to distinguish between those changes in the money value of gross national product which result from a change in prices and those which result from a change in physical output. The import and export price indexes produced by the International Price Program are used as deflators in the U.S. national accounts. For example, the Gross Domestic Product (GDP) equals consumption expenditures plus net investment plus government expenditures plus exports minus imports. Various price indexes are used to "deflate" each component of the GDP in order to make the GDP figures comparable over time. Import price indexes are used to deflate the import component (i.e., import volume is divided by the Import Price index) and the export price indexes are used to deflate the export component (i.e., export volume is divided by the Export Price index). http://www.bls.gov/bls/glossary.htm