Double deflation

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Updated: Aug 20, 2021

The estimation of net output at constant prices by revaluing both the gross output and the inputs of materials, fuel, services, etc., using appropriate index numbers, then subtracting the latter from the former. In practice the necessary price indices are often not available, and it is common to deffate net output at current prices by a single price index, usually an index of gross output. Single deflation therefore assumes that the ratio of net to gross output at constant prices remains unchanged, which may not be so if, for example, production methods change over time.

Reference: The Penguin Dictionary of Economics, 3rd edt.



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