The dynamic range is defined in this paper as the power ratio between the largest and smallest detectable signal amplitude without obvious distortion. The background noise of the system after PGC demodulation can be looked as the smallest detectable signal amplitude. The background noise of the system after PGC demodulation is near 0.012 rad/Hz1/2, which is shown in the insert of Fig. 7. The dynamic range of the demodulation system based on the improved PGC algorithm declines with increasing test signal frequency [15], which is shown in Fig. 7. The dynamic range is 55.14 dB at 200 Hz and 33.67 dB at 1500 Hz. As a result, carrier frequency should be adjusted according to actual measuring range of test signal.