A good's current price is 50 percent above its base-year price and its current quantity is the same in both calculations. What is its deflator?
Answer and explanation
Correct answer: 150
The deflator is (value at current prices ÷ value at base-year prices) × 100. Since the quantity is identical in both calculations, it cancels from the ratio. A current price 50% above the base price is 1.5 times the base price. Therefore, the deflator is 1.5 × 100 = 150. Option 100 would mean no price change, while 125 and 200 represent other price movements.
Frequently asked questions
What is the correct answer to this question?
150
Why is this the correct answer?
The deflator is (value at current prices ÷ value at base-year prices) × 100. Since the quantity is identical in both calculations, it cancels from the ratio. A current price 50% above the base price is 1.5 times the base price. Therefore, the deflator is 1.5 × 100 = 150. Option 100 would mean no price change, while 125 and 200 represent other price movements.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP Deflator.
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