Deflating GDP - what is the true figure?

Many of us will be teaching AS students about the methods of calculating GDP at the moment, and then about the use of inflation figures to calculate Real GDP. The Edexcel unit 2 paper this summer featured a question about GDP estimates, which indicated that it is worth spending a bit of time examining how and why the initial release of GDP figures is adjusted over time, as more accurate data becomes available, and also the use of the GDP deflator.

The Edexcel question was:

With reference to Extract 2, outline one possible reason why GDP estimates are frequently revised.

As luck would have it, there are two BBC items produced in the last few weeks which can help here. The first is an article by Joe Grice, Chief economist at the Office for National Statistics. Titled 'GDP figures explained by the ONS', this does what it says on the tin, and gives some clarity to the revisions which are made over time to the GDP data. It should also provoke some discussion about the sheer difficulty of obtaining sufficient accurate data to give a reasonable figure.

The second is a section of Tim Harford's 'More or Less', broadcast on Friday 13th Sept. (This was not the main headline item on the show - if you follow the link here you will see that was about the statistics of fertility, which might alarm students!) However, if you listen to the show from 9 minutes after the start, you will find a 4 minute discussion of GDP data and the deflator.