Deflator

A deflator is an index used to convert a price recorded in one year's money into a chosen base year's money, removing the effect of general inflation.

A deflator is the tool that turns a price recorded in the dollars, or other currency, of one year into a price expressed in the dollars of a different, chosen base year. Because a currency’s purchasing power erodes with inflation, comparing raw prices across decades makes ordinary inflation look like a genuine change in a commodity’s value.

Applying a deflator produces the real price, while the original, unadjusted figure is the nominal price. Economists commonly use a broad price index, such as a consumer or GDP deflator, rather than a commodity-specific one, so the adjustment reflects general inflation rather than the market being studied. The choice of base year changes the resulting numbers but not their relative pattern over time. See nominal vs real prices.