GDP Deflator

Correct answer: B. 20 percent

Explanation: The percentage change is calculated relative to the original deflator: ((180 − 225) / 225) × 100 = (−45 / 225) × 100 = −20%. Thus, the price level declines by 20 percent, so option B is correct. Option D is only the index-point fall, not the percentage fall; 15% and 25% do not follow from the required base-value calculation.

Correct answer: C. 22 percent rise

Explanation: The deflator is calculated as (Nominal GDP / Real GDP) × 100. With real GDP unchanged, the denominator remains constant, so a 22% rise in nominal GDP produces a 22% rise in the deflator. Hence option C is correct. A 20% increase would confuse percentage changes with index ratios, while 11% and 44% have no basis in the stated relationship.

Correct answer: C. ₹2,600

Explanation: Real GDP values current quantities at base-year prices, so it is calculated as (₹24 × 50) + (₹35 × 40). The first good contributes ₹1,200 and the second contributes ₹1,400; their sum is ₹2,600. Therefore option C is correct. Current prices must not be used, because that would calculate nominal GDP rather than real GDP.

Correct answer: C. ₹3,180

Explanation: Nominal GDP measures current production using current prices. Keeping the given quantities of 50 and 40, calculate (₹30 × 50) + (₹42 × 40) = ₹1,500 + ₹1,680 = ₹3,180. Thus option C is correct. Using the base prices of ₹24 and ₹35 would give real GDP, not nominal GDP, while the other totals contain arithmetic errors.

Correct answer: B. 122.3

Explanation: The GDP deflator is calculated as (Nominal GDP / Real GDP) × 100. Substituting the values gives (3,180 / 2,600) × 100 = 122.3077, which rounds to 122.3. Therefore option B is correct. The deflator is an index relative to the base period; it is not obtained by subtracting real GDP from nominal GDP or by dividing in the reverse order.

Correct answer: C. It will remain directly unchanged

Explanation: The GDP deflator covers prices of final goods and services produced domestically. An imported final good is excluded from domestic GDP, so a change in its price does not directly enter either the numerator or the relevant domestic-output price comparison. Therefore the deflator remains directly unchanged, making option C correct. A consumer price index could still rise because it may include imports.

Correct answer: C. 25 percent

Explanation: The percentage increase is calculated relative to the original index value, not merely by subtracting the two index numbers. The change is 75 − 60 = 15 points. Therefore, percentage increase = (15 ÷ 60) × 100 = 25 percent. Option A reports only the point increase, while option D incorrectly uses the new index level itself. Hence option C is correct.

Correct answer: B. 20 percent

Explanation: The percentage change in the price level is calculated relative to the original deflator: (new value − old value) ÷ old value × 100. Thus, (200 − 250) ÷ 250 × 100 = −20%. The negative sign indicates a decline, so the price level has fallen by 20%. Option C wrongly treats the 50-point fall as a percentage of 200, while option D confuses points with percent.

Correct answer: A. 5 percent rise

Explanation: Successive percentage changes must be applied to the changing base. Taking the initial deflator as 100, the 40% rise gives 140. A 25% fall is then 25% of 140, so the final value is 140 × 0.75 = 105. Compared with the original 100, this is a 5% increase. Directly subtracting 25 from 40 and obtaining 15% ignores the changed base.

Correct answer: B. 10 percent fall

Explanation: Use a base of 100 to account for the changing denominator. After a 25% fall, the deflator becomes 75. The following 20% rise is calculated on 75, giving 75 × 1.20 = 90. The final value is therefore 10 below the initial 100, which is a 10% net decline. A simple subtraction of 25% and 20% would incorrectly ignore the second year’s lower base.

Correct answer: B. 21.7 percent

Explanation: Because each annual increase is calculated on the previous year’s higher value, the growth is compounded. The total proportional increase is \((1.04)^5 − 1\). Calculating this gives approximately 0.2167, or 21.67%, which rounds to 21.7%. The 20% choice merely multiplies 4% by five and ignores compounding; 24% and 25% are also not supported by the compound-growth formula.

Correct answer: B. 10 percent

Explanation: First calculate each year’s GDP deflator: Year 1 = (2700 ÷ 2250) × 100 = 120, and Year 2 = (3168 ÷ 2400) × 100 = 132. The growth rate is (132 − 120) ÷ 120 × 100 = 10%. The 17.3% option incorrectly compares the deflator change with the real GDP level, while 8% and 12% do not follow the formula.

Correct answer: A. About 0.3 percent rise

Explanation: Nominal GDP equals real GDP multiplied by the price-level index. Represent the changes by factors: real GDP becomes 1.18 times its original value, while the deflator becomes 0.85 times its original value. The nominal factor is 1.18 × 0.85 = 1.003, so nominal GDP rises by 0.003 × 100 = approximately 0.3%. The effects nearly offset; adding 18% and 15% would be wrong.

Correct answer: B. ₹1600 करोड़

Explanation: The governing relationship is Real GDP = (Nominal GDP ÷ GDP Deflator) × 100. Substituting the values gives (2112 ÷ 132) × 100 = 16 × 100 = ₹1600 crore. Therefore, option B is correct. Option A omits the required multiplication by 100, while options C and D result from incorrect division or estimation. The deflator is an index with a base of 100, so the factor of 100 must be included.

Correct answer: C. 20 प्रतिशत

Explanation: Inflation based on the GDP deflator is calculated as [(new index − old index) ÷ old index] × 100. Here, the increase is 174 − 145 = 29 index points, and the rate is (29 ÷ 145) × 100 = 20%. Thus, option C is correct. The 29-point answer confuses an index-point change with a percentage change; 15% and 18% do not follow from the required base-year calculation.

Correct answer: B. 20 प्रतिशत

Explanation: The percentage decline must be measured against the initial deflator. The fall is 225 − 180 = 45 index points, so the percentage decline is (45 ÷ 225) × 100 = 20%. Therefore, option B is correct. Option D reports the point difference as a percentage, whereas 15% and 25% use an incorrect denominator or calculation. The original value is always the base for measuring a decline.

Correct answer: A. 24 बिंदु और 18.75 प्रतिशत

Explanation: The index-point rise is found by subtraction: 152 − 128 = 24 points. The inflation rate uses the initial index as the base: (24 ÷ 128) × 100 = 18.75%. Therefore, option A is correct. Option C treats the point rise as the percentage rate, while option B reverses the two quantities. Option D uses an incorrect point difference, so it cannot be correct.

Correct answer: C. 137.5

Explanation: The GDP deflator measures the price level of current domestic production relative to the base-year prices. Its formula is (Nominal GDP ÷ Real GDP) × 100. For the new year, (3300 ÷ 2400) × 100 = 1.375 × 100 = 137.5. Therefore, option C is correct. The earlier values are not needed for the new-year deflator; using 2750 or 2200 would produce the old-year ratio.

Correct answer: C. 156.25

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. Real GDP equals 64% of ₹3600 crore, so it is 0.64 × 3600 = ₹2304 crore. Hence the deflator is (3600 ÷ 2304) × 100 = 156.25. Option C is correct. The value 64 is the real-to-nominal ratio, while 125 is its incomplete reciprocal without the correct percentage calculation.

Correct answer: C. 25 percent

Explanation: A deflator is an index of the general price level, so the percentage change must be measured relative to the original index. The increase is 120 − 96 = 24 index points. Percentage increase = (24 ÷ 96) × 100 = 25%. Thus option C is correct. Option B reports the point increase, not the percentage increase; the denominator must be the initial value, 96.

Correct answer: B. 20 percent

Explanation: Because the deflator tracks the general price level, the percentage decline is calculated from the original index. The fall is 275 − 220 = 55 points. Percentage decline = (55 ÷ 275) × 100 = 20%. Therefore option B is correct. The value 55 is only the absolute index-point fall, while 25% would incorrectly use a different base.

Correct answer: A. Index levels change, but the general price trend usually remains

Explanation: Rebasing changes the reference point of an index, normally assigning a value of 100 to the new base year and rescaling the other observations. It does not erase the historical price movement or make inflation zero. The underlying comparisons and broad direction generally remain, although published index levels change. Thus option A is correct, while B, C and D confuse index presentation with real economic changes.

Correct answer: A. The first's nominal GDP will be 20 percent higher

Explanation: The governing identity is Nominal GDP = Real GDP × (Deflator ÷ 100). Because real GDP is equal in both economies, nominal GDP changes in the same proportion as the deflator. If the first deflator is 1.20 times the second, the first nominal GDP is also 1.20 times the second, or 20 percent higher. Therefore A is correct; equal real GDP does not imply equal nominal GDP when price levels differ.

Correct answer: A. The first economy

Explanation: Apply Real GDP = Nominal GDP ÷ (Deflator ÷ 100). With equal nominal GDP, the economy having the smaller deflator has the larger real GDP because the same money value is being adjusted for a lower price level. Since the first deflator is 25 percent lower, its real GDP is higher. Option A is correct; equal nominal GDP does not make real GDP equal.

Correct answer: C. 3.75:1

Explanation: The GDP deflator is defined as (nominal GDP ÷ real GDP) × 100. Substituting 375 gives (nominal GDP ÷ real GDP) = 375 ÷ 100 = 3.75. Hence the nominal-to-real GDP ratio is 3.75:1. Option A reverses the ratio, while option D fails to divide the index by 100. The result follows directly from the index-number definition.