How can the weights in the deflator change when the share of services in production rises rapidly?
Answer and explanation
Correct answer: The weight of services may rise
The GDP deflator reflects the composition of current domestic production, so the relative importance or weight of each component is linked to its share in output. If services account for a larger share of production, their prices can receive a larger weight in the aggregate index. Therefore option A is correct. The other choices incorrectly assume that services are excluded or that production weights never respond to structural change.
Frequently asked questions
What is the correct answer to this question?
The weight of services may rise
Why is this the correct answer?
The GDP deflator reflects the composition of current domestic production, so the relative importance or weight of each component is linked to its share in output. If services account for a larger share of production, their prices can receive a larger weight in the aggregate index. Therefore option A is correct. The other choices incorrectly assume that services are excluded or that production weights never respond to structural change.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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