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If the price of imported computers falls while the price of domestic computers rises, what provides the main direct effect on the GDP deflator?

Answer and explanation

Correct answer: From the rise in domestic computer prices

The GDP deflator is based on the prices of final goods and services produced within the domestic economy. Domestic computers are part of that production and their price rise can directly affect the deflator. Imported computers are not domestic output, so their price fall does not have the same direct effect. Hence option A is correct; options C and D ignore the coverage rule, while B confuses imports with domestic production.

Related tags

Gdp DeflatorImportsDomestic OutputPrice IndexGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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