GDP Deflator

Correct answer: A. (Nominal GDP ÷ Real GDP) × 100

Explanation: The GDP deflator measures the overall price level of domestically produced final goods and services relative to the base year. Its formula is GDP deflator = (nominal GDP ÷ real GDP) × 100. Nominal GDP uses current prices, whereas real GDP uses base-year prices. A value of 100 represents the base-year price level; a higher value indicates higher prices than in the base year.

Correct answer: A. 120

Explanation: Apply the GDP deflator formula: GDP deflator = (nominal GDP ÷ real GDP) × 100. Therefore, (₹15,000 ÷ ₹12,500) × 100 = 1.2 × 100 = 120. A deflator of 120 means that the measured price level is 20 percent above the base-year level, assuming the usual index interpretation. The result is not 80, because that reverses the numerator and denominator.

Correct answer: A. 120

Explanation: The GDP deflator is calculated as: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the given values gives (24,000 ÷ 20,000) × 100 = 1.2 × 100 = 120. Thus, the correct answer is 120. A deflator of 120 means that, relative to the base-year price level represented by 100, the prices of domestically produced final goods and services are approximately 20% higher.

Correct answer: A. The price level is about 10% higher than in the base year

Explanation: The GDP deflator is an index with a base-year value of 100. A value of 110 indicates that the prices of domestically produced final goods and services, taken together, are about 10% higher than their average level in the base year. It does not mean that real GDP is zero or that depreciation equals 110. The exact interpretation refers to the overall price index, not necessarily every individual price.

Correct answer: A. The average price change of all final goods and services included in GDP

Explanation: The GDP deflator is a broad measure of the price level for domestically produced final goods and services included in GDP. It is calculated as nominal GDP divided by real GDP, multiplied by 100. Unlike a consumer price index, it is not restricted to a fixed basket of consumer goods and does not focus only on imports. Thus, it reflects the overall price movement of the GDP basket.

Correct answer: A. 800

Explanation: The GDP-deflator relationship is: Real GDP = (Nominal GDP ÷ GDP Deflator) × 100. Substituting the given values gives (1200 ÷ 150) × 100 = 8 × 100 = 800. Thus, the correct answer is 800. The multiplication by 100 is necessary because the deflator is an index whose reference value is 100.

Correct answer: B. Relating nominal GDP to real GDP to measure the overall price level

Explanation: The GDP deflator is a broad price index for all domestically produced final goods and services included in GDP. It is calculated as (Nominal GDP ÷ Real GDP) × 100. By comparing current-price GDP with constant-price GDP, it shows how much of the change in nominal GDP is due to changes in the general price level rather than changes in physical output. Therefore, option B is correct.

Correct answer: C. 1000 (एक हजार)

Explanation: The GDP Deflator is calculated as: GDP Deflator = (Nominal GDP ÷ Real GDP) × 100. Rearranging the formula gives Nominal GDP = (GDP Deflator × Real GDP) ÷ 100. Substituting the values, Nominal GDP = (125 × 800) ÷ 100 = 1000. Therefore, option C is correct. The deflator of 125 indicates that the overall price level is 25% higher than in the base year.

Correct answer: C. 125

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (15000 ÷ 12000) × 100 = 1.25 × 100 = 125. Thus, the deflator is 125, meaning that the overall price level represented by current-production GDP is 25 percent above the base-year level, assuming the base-year deflator is 100. Therefore, option C is correct.

Correct answer: C. 120

Explanation: The GDP deflator measures the price level of domestically produced final goods and services relative to the base year. Its formula is GDP deflator = (GDP at current prices ÷ GDP at constant prices) × 100. Therefore, (1800 ÷ 1500) × 100 = 1.2 × 100 = 120. Hence, option C is correct; the result indicates that the current-price level is 20% above the base-year level.

Correct answer: C. 22,000

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. Therefore, Nominal GDP = (Real GDP × GDP Deflator) ÷ 100 = (20,000 × 110) ÷ 100 = 22,000. Hence, option C is correct. The deflator of 110 means that the current-price value is 10% higher than the base-year-price value.

Correct answer: C. 120

Explanation: The GDP deflator is calculated using the formula: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (2400 ÷ 2000) × 100 = 1.2 × 100 = 120. Thus, the deflator is 120, indicating that the GDP price level is 20% above the base-year level represented by an index of 100. Therefore, option C is correct.

Correct answer: C. 120

Explanation: The NDP deflator is an index of the price level and is calculated as (Nominal NDP ÷ Real NDP) × 100. Substituting the values gives (₹7,200 ÷ ₹6,000) × 100 = 1.2 × 100 = 120. Hence option C is correct. A value of 100 would mean no price difference, while 110 and 125 do not follow from the given ratio.

Correct answer: C. 110

Explanation: The NDP deflator measures the price level of domestically produced final goods relative to the base year. It is calculated as (nominal NDP ÷ real NDP) × 100. Thus, (₹8,800 ÷ ₹8,000) × 100 = 110. Option C is correct. A value of 100 would indicate no price increase, while 105 and 120 do not follow from the given ratio.

Correct answer: B. 100

Explanation: The GDP deflator is calculated by the formula: (Nominal GDP ÷ Real GDP) × 100. Substituting the given values gives (₹10,000 crore ÷ ₹10,000 crore) × 100 = 1 × 100 = 100. Therefore, option B is correct. A deflator of 100 means that the current price level equals the base-year price level in this comparison.

Correct answer: C. 100

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. In the base year, the prices used for nominal GDP and real GDP are the same, so nominal GDP equals real GDP. Their ratio is therefore 1, and 1 × 100 = 100. Hence option C is correct. Values such as 50 or 200 would imply that current prices differ from the base-year benchmark, which is not the case in the base year.

Correct answer: B. 100

Explanation: The GDP deflator is defined as (Nominal GDP ÷ Real GDP) × 100. If nominal GDP and real GDP are equal, their ratio is 1. Consequently, the deflator equals 1 × 100 = 100. Option B is correct. A deflator of 100 means that the relevant current-price level is equal to the base-year price level; values below or above 100 would indicate lower or higher prices respectively.

Correct answer: C. ₹1,000 crore

Explanation: The deflator formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Rearranging gives Real GDP = Nominal GDP × 100 ÷ Deflator. Substitution yields ₹900 crore × 100 ÷ 90 = ₹1,000 crore, so option C is correct. Since the deflator is below 100, the price level is below the base-year level and real GDP can be higher than nominal GDP.

Correct answer: D. ₹2,500 crore

Explanation: The GDP deflator is defined as (Nominal GDP ÷ Real GDP) × 100. Solving for nominal GDP gives Real GDP × Deflator ÷ 100. Therefore, nominal GDP = ₹2,000 crore × 125 ÷ 100 = ₹2,500 crore. Option D is correct. The deflator of 125 means current prices are 25% above the base-year level, so nominal GDP exceeds real GDP in this case.

Correct answer: A. GDP deflator

Explanation: The GDP deflator is a broad price index for domestically produced final goods and services. It captures the price component of nominal GDP. Using the relationship Real GDP = (Nominal GDP ÷ GDP deflator) × 100, when the deflator is expressed with base year = 100, nominal GDP can be converted into real GDP. Therefore, option A is correct; the other indicators do not measure the GDP price level.

Correct answer: B. It will rise

Explanation: When the deflator uses a base-year index of 100, the relationship is Nominal GDP = Real GDP × GDP deflator ÷ 100. If real GDP remains constant and the deflator rises, the multiplication produces a higher nominal GDP. Thus, option B is correct. A fall would require a lower deflator, while unchanged or zero nominal GDP is inconsistent with a higher price index and positive real output.

Correct answer: B. It will rise

Explanation: The governing relationship is Real GDP = (Nominal GDP × 100) ÷ GDP deflator. When nominal GDP is fixed, a fall in the deflator reduces the denominator, so the calculated real GDP rises. Therefore, option B is correct. Option A reverses the mathematical relationship, option C ignores the change in the denominator, and option D is unwarranted because a lower deflator does not make output negative.

Correct answer: C. 20 percent

Explanation: The GDP deflator measures the price level relative to the base year: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (1,500 ÷ 1,250) × 100 = 120. A deflator of 120 means prices are 120% of the base-year level, or 20% above it. Thus option C is correct; 10%, 15%, and 25% do not follow from the calculation.

Correct answer: B. 95

Explanation: The governing formula is GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Therefore, the deflator is (₹760 ÷ ₹800) × 100 = 0.95 × 100 = 95. Option B is correct. Since the index is below 100, the current general price level is lower than the base-year level. The values 90, 100, and 105 result from incorrect division or interpretation.

Correct answer: B. Decrease of 10 index points

Explanation: The GDP deflator is a price index, so its movement indicates a change in the general price level relative to the base year. The change is 115 − 125 = −10, meaning the index decreased by 10 points. Therefore option B is correct. This information alone should not be described as a 10% fall, because the percentage fall would be calculated as 10 ÷ 125 × 100, approximately 8%.