GDP Deflator

Inflation between two periods is the percentage increase in the price index, not merely the numerical difference between index values. Calculate it as [(154 − 140) ÷ 140] × 100 = (14 ÷ 140) × 100 = 10%. The previous-period deflator, 140, is the denominator. Hence option B is correct; 14% is only the index-point rise.

Nominal GDP measures current production using current-period prices. With quantities of 100 and 50, the first good contributes ₹7.5 × 100 = ₹750, while the second contributes ₹16 × 50 = ₹800. Therefore nominal GDP is ₹750 + ₹800 = ₹1,550, so option C is correct. Base-year prices would instead be used for real GDP.

The GDP deflator is calculated as (nominal GDP ÷ real GDP) × 100. Substituting the values gives (₹1,550 ÷ ₹1,300) × 100 = 119.2307..., which is approximately 119.2. Therefore option B is correct. The value is above 100 because current prices are higher, on average, than base-year prices; the other options result from incorrect division or rounding.

A price index is normalized to 100 in its base year. In the new base year, nominal GDP and real GDP are valued using the same year’s prices, so their ratio is 1; multiplying by 100 gives a deflator of 100. Thus option C is correct. Values such as 0, 50 or 150 would not represent the standard base-year index convention.

The deflator is calculated as (nominal GDP / real GDP) × 100, so its index value directly expresses the current price level as a percentage of the base-year level. A value of 160 means current average prices equal 160% of base-year prices, or are 60% higher than them. Therefore option C is correct; 60% is only the increase, not the index level.

The GDP deflator indicates the general price level of final goods and services produced within the domestic economy. It is a broad price index derived by comparing nominal GDP with real GDP, rather than an indicator of one social or economic variable. Therefore, option A is correct; unemployment, population and foreign investment are measured by separate indicators.

The GDP deflator formula is: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Hence, nominal GDP is placed in the numerator and real GDP in the denominator. Option B is correct. Population and net exports may be relevant to other economic calculations, but neither occupies the numerator of this price-index formula.

The GDP deflator is calculated using (Nominal GDP ÷ Real GDP) × 100. Therefore, real GDP is placed in the denominator, while nominal GDP is placed in the numerator. Option C is correct. Population and total saving are not components of this price-index formula, and reversing the two GDP measures would produce an incorrect interpretation.

Apply the GDP deflator formula: (Nominal GDP ÷ Real GDP) × 100. Thus, (₹480 crore ÷ ₹400 crore) × 100 = 1.2 × 100 = 120. Therefore, option D is correct. A deflator of 120 means the overall price level of domestic final output is 20% higher than in the base year; it is not the same as a 120% increase.

Since GDP deflator = (Nominal GDP ÷ Real GDP) × 100, rearrange the formula: Nominal GDP = (Deflator × Real GDP) ÷ 100. Substitution gives (125 × ₹600 crore) ÷ 100 = ₹750 crore. Therefore, option A is correct. The other values result from using an incorrect percentage or reversing the relationship.

Starting with GDP deflator = (Nominal GDP ÷ Real GDP) × 100, rearrange to Real GDP = (Nominal GDP × 100) ÷ Deflator. Therefore, Real GDP = (₹945 × 100) ÷ 105 = ₹900 crore. Option B is correct. The answer is below nominal GDP because the deflator is 105, indicating prices are 5% above the base-year level.

The GDP deflator is an index whose base-year value is 100. A deflator of 118 means the current price level is 118% of the base-year price level. Therefore, the increase is 118 − 100 = 18 percentage points, or 18%. Option C is correct. The value 118 is the index itself, while 8 and 12 do not represent the difference from the base-year benchmark.

The base-year GDP deflator is 100. A deflator of 72 indicates that the current price level is 72% of the base-year level. The decline is therefore 100 − 72 = 28%. Option D is correct. The number 72 states the remaining price-level index, not the reduction; the other percentages do not follow from the index comparison.

An index number is conventionally assigned a value of 100 in the base year. The GDP deflator compares the current price level with that base-year benchmark, so the base-year deflator is normally 100. Option A is correct. Values such as 10, 50, or 1000 are not the standard benchmark and would make ordinary percentage comparisons less direct.

The GDP deflator uses 100 as the base-year index. Thus, when the deflator equals 100, the measured price level is exactly the same as in the base year. Option C is correct. A value of 200 would indicate a price level twice the base-year level, while 50 would indicate half; the deflator itself gives no basis for concluding that real output is zero.

The GDP deflator is calculated as nominal GDP divided by real GDP, multiplied by 100. It reflects the average price level of domestically produced final goods and services. When the deflator rises, prices of current domestic output are generally higher relative to the base year, indicating inflation. Unemployment, population decline and foreign debt are not directly measured by this index.

The GDP deflator measures the price level associated with current domestic production. If it falls, the average prices of domestically produced final goods and services are generally declining relative to the base year, which indicates deflation or disinflationary pressure. A rise in real output concerns quantities, not necessarily prices, while population growth does not determine the deflator.

The GDP deflator covers prices of final goods and services produced within a country during the relevant period. A newly produced domestic tractor is part of current domestic output, so its price contributes to nominal GDP and can enter the deflator. An import is foreign production, a used-bicycle sale is not current production, and a share purchase is a financial transaction rather than output.

The GDP deflator is based on the prices of final goods and services produced domestically. A new domestic car, a domestic medical service and a machine produced within the country represent current domestic output. An imported camera is produced abroad, so its price is not directly part of domestic GDP or the GDP deflator, although imports affect GDP through the subtraction of imports in expenditure accounting.

GDP includes the market value of final goods and services produced within the domestic economy. Therefore, when a medical, transport, education, repair or other service is provided domestically for payment, its price represents part of current domestic final output and can be reflected in the GDP deflator. Services are not excluded merely because they are intangible; the other options contradict their economic treatment.

GDP measures the value of production during the current accounting period, not every market transaction. A used car was counted when it was originally manufactured in an earlier year. Its resale transfers ownership but does not create new output, so the resale value is excluded from current GDP and the GDP deflator. Any current dealer or brokerage service connected with the sale may be counted separately.

The governing concept is the GDP-deflator relationship: Real GDP = (Nominal GDP ÷ GDP deflator) × 100. Substituting the values gives (1320 ÷ 120) × 100 = 11 × 100 = ₹1100 crore. Therefore option A is correct. Options B, C, and D result from using an incorrect divisor or reversing the formula.

The governing formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Thus, deflator = (875 ÷ 700) × 100 = 1.25 × 100 = 125. Hence option B is correct. A value of 125 indicates that the relevant price level is 25% above the base-year level. The other choices do not follow from the required ratio.

A GDP deflator of 100 represents the base-year price level. A deflator of 145 means the current price level is 145% of that base, so the increase is 145 − 100 = 45%. Therefore option C is correct. The value 145 is the index level itself, not the percentage increase; the other options miscalculate the difference.

The base-year deflator is 100. When the deflator is 55, the price level equals 55% of the base-year level. The shortfall is therefore 100 − 55 = 45%. Thus option D is correct. Option C states the remaining level, not the amount by which it is lower; the other percentages do not match the index difference.