GDP Deflator

Correct answer: C. ₹900 करोड़

Explanation: Use the GDP-deflator identity: Deflator = (Nominal GDP ÷ Real GDP) × 100. Solving for real GDP gives Real GDP = Nominal GDP × 100 ÷ Deflator. Therefore, Real GDP = ₹990 crore × 100 ÷ 110 = ₹900 crore. Option C is correct. ₹1,089 crore reverses the adjustment, while ₹800 crore and ₹850 crore do not satisfy the stated ratio.

Correct answer: B. 5 percent

Explanation: The inflation rate represented by the index movement is calculated as the percentage change relative to the initial GDP deflator. The change is 126 − 120 = 6. Therefore, inflation rate = (6 ÷ 120) × 100 = 5%. Option B is correct. The six-point increase is not 6% because percentage change must use the starting value, 120, as its denominator.

Correct answer: A. 10 प्रतिशत गिरावट

Explanation: The percentage change must be measured against the initial deflator of 150. Percentage change = [(135 − 150) ÷ 150] × 100 = (−15 ÷ 150) × 100 = −10%. The negative sign indicates a fall, so the price level decreased by 10%. Therefore, option A is correct; 15 is the point change, not the percentage change.

Correct answer: B. A basket that changes with current domestic output

Explanation: The GDP deflator measures the price change of all final goods and services produced domestically. Its weights are based on the composition of current domestic output, so the basket can change when the economy produces different quantities or types of goods. Therefore, option B is correct. A permanently fixed consumer basket describes a CPI-style approach, while imported-only and food-only baskets are far too narrow.

Correct answer: A. Yes because they are part of domestic final output

Explanation: The GDP deflator is calculated as nominal GDP divided by real GDP, multiplied by 100, and it covers final domestic production. New machines, equipment, and other domestically produced capital goods are investment components of GDP, so their prices contribute to the deflator. Hence option A is correct. The deflator is not restricted to consumer goods, investment is not always imported, and inclusion is not limited to the base year.

Correct answer: A. Yes because they are domestic final services

Explanation: Government-provided services such as public administration, education, or defence represent production and are included in GDP when supplied domestically. Because the GDP deflator covers prices associated with domestic final output, the measured value of these services can enter its numerator and influence the index. Thus option A is correct. Government services are not automatically excluded merely because they may not be sold at a market price; they are often valued using production cost.

Correct answer: A. GDP deflator

Explanation: The GDP deflator covers the prices of all final goods and services produced within the economy, including domestically produced capital goods such as machines. Therefore, a rise in machine prices can raise the deflator even if consumer prices do not change. Option A is correct. Population and unemployment indices do not directly measure the prices of machines, while option D ignores the investment component of domestic output.

Correct answer: A. Consumer price index

Explanation: The Consumer Price Index measures the prices paid for a representative basket consumed by households, and that basket can contain imported mobile phones. The GDP deflator, in contrast, covers production within the domestic economy and excludes imports from domestic GDP. Therefore option A is the best answer. A higher import price may affect consumption costs, but it does not directly become a price of domestic output or automatically change real GDP or population.

Correct answer: C. 8 percent

Explanation: The GDP deflator is a price index derived from nominal and real GDP. If quantities and the composition of domestic output remain unchanged, but all relevant prices increase by 8 percent, nominal GDP rises relative to real GDP by approximately the same proportion. Consequently, the deflator also rises by about 8 percent. Option C is correct; zero would ignore the price change, while 4 and 16 percent do not follow from the stated uniform increase.

Correct answer: A. About 3.7 percent

Explanation: Because the GDP deflator equals nominal GDP divided by real GDP, the price-level factor is 1.12/1.08. Thus the percentage change is (1.12 ÷ 1.08 − 1) × 100, which is approximately 3.7037 percent, or 3.7 percent. Option A is correct. Subtracting 8 from 12 gives 4 percent, a rough shortcut, but the exact ratio gives the more accurate answer.

Correct answer: A. About 3.6 percent fall

Explanation: The implicit price-level factor is obtained from the GDP-deflator relationship: 1.06/1.10. Therefore the price change is (1.06 ÷ 1.10 − 1) × 100, equal to about −3.64 percent. This means a fall of approximately 3.6 percent, so option A is correct. Since real GDP grew faster than nominal GDP, the difference reflects deflation rather than a price increase.

Correct answer: A. 4 percent

Explanation: Inflation is the percentage increase in the price index, calculated relative to the previous year's index. Here the change is 130 − 125 = 5 index points, and the inflation rate is (5 ÷ 125) × 100 = 4 percent. Therefore option A is correct. The 5-point increase is not itself 5 percent because the base value is 125; 30 percent incorrectly uses the second index as a percentage.

Correct answer: B. 10 percent

Explanation: The GDP deflator measures the price level relative to the base year. The percentage rise between the two years is calculated using year one as the reference: [(121 − 110) ÷ 110] × 100 = 10%. Therefore, option B is correct. The value 11 is only the absolute index-point increase, while 21 is the difference between the two index values expressed incorrectly as a percentage.

Correct answer: B. 10 percent

Explanation: Inflation is the percentage increase in the price index from one period to the next. Here, the change in the GDP deflator is 88 − 80 = 8 points. Dividing by the initial value gives (8 ÷ 80) × 100 = 10%. Thus, option B is correct. The answer is not 8%, because 8 is the index-point change, not the percentage change.

Correct answer: B. 25 percent

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. Thus, (2,500 ÷ 2,000) × 100 = 125. Since the base-year index is 100, the price level is 125 − 100 = 25% higher than in the base year. Therefore, option B is correct. Option D reports the index value itself, not the increase above the base-year level.

Correct answer: B. 90

Explanation: The GDP deflator compares nominal GDP with real GDP: Deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the values gives (2,160 ÷ 2,400) × 100 = 90. Therefore, option B is correct. A deflator of 90 means the measured price level is 10% below the base-year level, whereas 100 would indicate equal prices and 110 would indicate a 10% increase.

Correct answer: C. 120

Explanation: The GDP deflator is the ratio of nominal GDP to real GDP multiplied by 100. Therefore, Deflator = (1,320 ÷ 1,100) × 100 = 1.2 × 100 = 120. Option C is correct. A deflator of 120 indicates that the price level of current output is, on average, 20% above the base-year level; 132 incorrectly treats nominal GDP as the index.

Correct answer: A. To better reflect the changing production structure and prices

Explanation: The base year provides the reference prices and weights used to construct a price index such as the GDP deflator. As consumption patterns, technologies, industries, and the composition of domestic output change, an old base year becomes less representative. Periodic revision improves relevance and reduces measurement bias. It does not freeze prices, control population, or convert imports into domestic production; therefore, option A is correct.

Correct answer: A. According to the composition of current output

Explanation: The GDP deflator is calculated from nominal GDP divided by real GDP, with real GDP valued at base-year prices. Its coverage and implicit weights are linked to the goods and services produced domestically in the current period. If the composition of current output changes, the relative importance of items in the deflator can also change. Population and exchange rates alone do not determine these weights, so option A is correct.

Correct answer: A. By including it in the current domestic output basket

Explanation: Unlike a strictly fixed consumer basket, the GDP deflator is an implicit index based on the value and volume of goods and services produced domestically. When a new good begins to be produced, it becomes part of current domestic output and can enter the measured output basket and its value. It is not automatically excluded, classified as an import, or assigned a zero price. Therefore, option A is correct.

Correct answer: A. Quality adjustment

Explanation: A price increase does not necessarily represent pure inflation when the product has also improved. Part of the additional price may compensate for better durability, performance, safety, or features. Quality adjustment attempts to separate the value of the improvement from the underlying price change, preventing inflation from being overstated. Population adjustment, adding imports, or setting the price to zero does not solve this measurement problem. Hence, option A is correct.

Correct answer: B. 50 percent

Explanation: Use the GDP-deflator formula: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting 50 gives Nominal GDP ÷ Real GDP = 50 ÷ 100 = 0.5. Therefore, nominal GDP equals one-half, or 50%, of real GDP under the stated index values. The answer is not 25%, 100%, or 200%; hence option B is correct.

Correct answer: C. 125 percent

Explanation: The GDP deflator is calculated as (Nominal GDP ÷ Real GDP) × 100. If the index is 125, then Nominal GDP ÷ Real GDP = 125 ÷ 100 = 1.25. Consequently, nominal GDP is 125% of real GDP, or 25% higher than it. The value 80% is the inverse ratio expressed as real GDP relative to nominal GDP, not the quantity asked. Therefore, option C is correct.

Correct answer: C. 115

Explanation: Apply the standard formula: GDP deflator = (Nominal GDP ÷ Real GDP) × 100. Substituting the given values gives (₹1,380 crore ÷ ₹1,200 crore) × 100 = 1.15 × 100 = 115. The common unit, crore, cancels in the ratio. Thus, the implied price level is 15% above the base-year level, and option C is correct.

Correct answer: C. ₹2,100 crore

Explanation: The governing relationship is: Nominal GDP = Real GDP × GDP deflator ÷ 100. Substituting the given values gives ₹1,750 × 120 ÷ 100 = ₹2,100 crore. Therefore, option C is correct. The deflator of 120 means that the current-price value is 120% of the base-year-price value; the other options result from using an incorrect percentage or arithmetic operation.