A good's current price is 35 percent below its base-year price. With the same current quantity what is its deflator?
Answer and explanation
Correct answer: 65
A price 35% below the base-year price is 100% − 35% = 65% of the base-year price. Since quantity is identical in the two valuations, the quantity terms cancel. Thus, the deflator = (current-price value ÷ base-price value) × 100 = 65. Option 35 confuses the fall with the remaining price level, while 100 would mean no price change.
Frequently asked questions
What is the correct answer to this question?
65
Why is this the correct answer?
A price 35% below the base-year price is 100% − 35% = 65% of the base-year price. Since quantity is identical in the two valuations, the quantity terms cancel. Thus, the deflator = (current-price value ÷ base-price value) × 100 = 65. Option 35 confuses the fall with the remaining price level, while 100 would mean no price change.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP Deflator.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
