GDP Deflator

Correct answer: C. 120

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. Thus, deflator = (₹1,920 ÷ ₹1,600) × 100 = 1.2 × 100 = 120. Option C is correct. A value of 120 means the price level is 20% above the base-year level. The other values do not result from the given nominal-to-real GDP ratio.

Correct answer: C. 125

Explanation: The GDP deflator measures the price level of domestically produced final goods relative to the base year. Its formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (3,000 ÷ 2,400) × 100 = 1.25 × 100 = 125. Thus option C is correct. A deflator of 125 indicates that the relevant price level is 25 percent above the base-year level.

Correct answer: B. Price level is 30 percent above the base year

Explanation: The GDP deflator uses 100 as the price-level index for the base year. A value of 130 means that the prices of currently produced final goods and services are, on average, 130/100 times the base-year level. Thus the price level is 30% higher than in the base year, so option B is correct. It does not indicate a 130% output increase or a fall in real GDP.

Correct answer: A. Price level is 8 percent below the base year

Explanation: The GDP deflator is an index with a base-year value of 100. A deflator of 92 is 8 index points below 100, so the relevant price level is 8% lower than the base-year level. Therefore option A is correct. The figure does not mean prices are 92% higher, nor does it directly measure an 8% output increase or imply that nominal GDP is zero.

Correct answer: C. 120

Explanation: The GDP deflator measures the price level of domestically produced final goods relative to the base year. Its formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substitution gives (₹1,500 crore ÷ ₹1,250 crore) × 100 = 1.2 × 100 = 120. Therefore, option C is correct. A value of 120 indicates that the measured price level is 20% above the base-year level.

Correct answer: B. ₹900 crore

Explanation: The GDP deflator formula is Deflator = (Nominal GDP ÷ Real GDP) × 100. Rearranging gives Real GDP = (Nominal GDP × 100) ÷ Deflator. Substituting the data: (₹1,080 crore × 100) ÷ 120 = ₹900 crore. Thus option B is correct. The deflator above 100 shows that current prices exceed base-year prices, so nominal GDP must be adjusted downward to obtain real GDP.

Correct answer: D. ₹2,760 crore

Explanation: The GDP deflator connects nominal and real GDP through: Deflator = (Nominal GDP ÷ Real GDP) × 100. Solving for nominal GDP gives Nominal GDP = Real GDP × Deflator ÷ 100. Therefore, ₹2,400 crore × 115 ÷ 100 = ₹2,760 crore, so option D is correct. Option C would incorrectly apply a deflator of 110, while option B ignores the price adjustment entirely.

Correct answer: B. GDP deflator

Explanation: The GDP deflator is the broad price index used to remove the effect of price changes from nominal GDP. The standard relationship is Real GDP = (Nominal GDP ÷ GDP deflator) × 100, when the deflator is expressed with a base of 100. Thus option B is correct. Unemployment and birth rates are demographic or labour indicators, while the fiscal deficit measures a government budget imbalance.

Correct answer: B. It will rise

Explanation: The GDP deflator measures the price level of domestically produced final output. The relationship is nominal GDP = real GDP × GDP deflator ÷ 100. If real GDP remains fixed while the deflator rises, the product increases, so nominal GDP rises. Option B is correct. A fall or unchanged nominal value would contradict the formula, and a negative value is impossible here because the relevant quantities are positive.

Correct answer: C. 20 percent

Explanation: The GDP deflator measures the current price level relative to the base year: Deflator = (Nominal GDP ÷ Real GDP) × 100. Here, (2,700 ÷ 2,250) × 100 = 120. A base-year index of 100 and a current index of 120 imply that prices are 20% higher. Therefore, option C is correct; the other percentages do not follow from the calculation.

Correct answer: B. 95

Explanation: The governing formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (1,140 ÷ 1,200) × 100 = 0.95 × 100 = 95. Therefore, option B is correct. A value of 100 would mean nominal and real GDP are equal, while 90 or 105 results from an incorrect calculation or reversed relationship.

Correct answer: D. 125

Explanation: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Using the data, (₹3,500 crore ÷ ₹2,800 crore) × 100 = 1.25 × 100 = 125. Therefore, option D is correct. A deflator of 125 means the current price level is 25% above the base year; the lower options underestimate the price-level index.

Correct answer: C. 112.5

Explanation: The governing formula is GDP deflator = (nominal GDP ÷ real GDP) × 100. Substituting the given values gives (₹4,050 ÷ ₹3,600) × 100 = 1.125 × 100 = 112.5. Therefore option C is correct. A deflator of 112.5 also indicates that the general price level is 12.5% above the base-year level; the other numerical options do not follow the formula.

Correct answer: C. ₹33,000 crore

Explanation: The GDP-deflator identity is: deflator = (nominal GDP ÷ real GDP) × 100. Rearranging gives nominal GDP = real GDP × deflator ÷ 100. Therefore, nominal GDP = ₹30,000 crore × 110 ÷ 100 = ₹33,000 crore. Option C is correct. Option B ignores the price adjustment, option A divides by 110, and option D applies an incorrect multiplier.

Correct answer: B. ₹25,000 crore

Explanation: Using deflator = (nominal GDP ÷ real GDP) × 100, real GDP = nominal GDP × 100 ÷ deflator. Substitution gives ₹32,000 crore × 100 ÷ 128 = ₹25,000 crore. Thus option B is correct. Option A divides by 160, option C does not remove the full price effect, and option D multiplies instead of deflating the nominal value.

Correct answer: B. 8 percent

Explanation: Nominal GDP reflects both changes in output and changes in prices. Since real GDP is nominal GDP adjusted for the price level, the standard approximate relationship is real growth ≈ nominal growth − inflation or deflator growth. Thus, 20% − 12% = 8%. Option B is correct. The exact ratio would be slightly different, but 8% is the intended approximation; the other choices use unrelated operations.

Correct answer: C. 11 percent

Explanation: Nominal GDP combines the effect of real output growth with the effect of price-level growth. For an approximate calculation, nominal growth ≈ real GDP growth + deflator growth. Therefore, 5% + 6% = 11%, so option C is correct. The exact multiplicative calculation gives 1.05 × 1.06 − 1 = 11.3%, which rounds to about 11%; the other options omit or misuse one of the two components.

Correct answer: C. Lower

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. When nominal GDP is lower than real GDP, this ratio is below 1, so the deflator is below 100. A value below 100 means that the current general price level is lower than the base-year level. Hence option C is correct; equality would require a deflator of 100.

Correct answer: A. The price level is sixty percent above the base year

Explanation: The GDP deflator is an index with a base-year value of 100. A deflator of 160 means the measured price level is 160% of the base-year level. The increase over the base is 160 − 100 = 60 index points, or 60%. Therefore, option A is correct. The index does not directly state that real output or population changed by 60%.

Correct answer: B. One hundred twenty-five

Explanation: The GDP deflator measures the price level of domestically produced final goods relative to the base year. Its formula is (nominal GDP / real GDP) × 100. Substitution gives (2,000 / 1,600) × 100 = 1.25 × 100 = 125. Therefore option B is correct; the other values result from incorrect division or scaling.

Correct answer: A. One thousand two hundred crore rupees

Explanation: The GDP-deflator relationship is: GDP deflator = (nominal GDP / real GDP) × 100. Rearranging gives nominal GDP = real GDP × deflator / 100. Thus, nominal GDP = 1,500 × 80 / 100 = ₹1,200 crore. Option A is correct; the other choices do not apply the index relationship correctly.

Correct answer: B. One thousand five hundred crore rupees

Explanation: Use the deflator formula: GDP deflator = (nominal GDP / real GDP) × 100. Solving for real GDP gives nominal GDP × 100 / deflator. Therefore, real GDP = 1,800 × 100 / 120 = ₹1,500 crore. Option B is correct. The other options come from failing to divide by the price index or using the wrong direction of adjustment.

Correct answer: A. Output has fallen and prices have risen

Explanation: Real GDP measures changes in the volume of production after removing price effects, whereas the GDP deflator reflects the price level of domestically produced final goods and services. Consequently, falling real GDP combined with a rising deflator indicates lower real output alongside higher prices. This can describe inflation occurring during an output contraction. The other options contradict at least one of the stated movements.

Correct answer: A. It will decrease

Explanation: The governing relationship is Nominal GDP = Real GDP × (GDP deflator/100). If real GDP is constant and the deflator falls, the multiplier representing the price level becomes smaller. Consequently, nominal GDP decreases. Option A is correct. It would remain unchanged only if both the real GDP and the deflator were unchanged; the information given rules out that possibility.

Correct answer: D. 125

Explanation: The governing formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the data gives (₹800 ÷ ₹640) × 100 = 1.25 × 100 = 125. Therefore option D is correct. A value of 100 would indicate equal nominal and real GDP, while 80 reverses the ratio; 120 does not follow from the stated figures. The deflator summarizes the price level relative to the base year.