If nominal GDP is 30 percent higher than real GDP, what is the deflator?
Answer and explanation
Correct answer: 130
The GDP deflator equals (Nominal GDP ÷ Real GDP) × 100. If nominal GDP is 30% higher than real GDP, it equals 130% of real GDP, or 1.30 times real GDP. Thus, the deflator is 1.30 × 100 = 130, so option B is correct. The figure 30 is only the increase rate, not the index value; 100 would indicate no price difference.
Frequently asked questions
What is the correct answer to this question?
130
Why is this the correct answer?
The GDP deflator equals (Nominal GDP ÷ Real GDP) × 100. If nominal GDP is 30% higher than real GDP, it equals 130% of real GDP, or 1.30 times real GDP. Thus, the deflator is 1.30 × 100 = 130, so option B is correct. The figure 30 is only the increase rate, not the index value; 100 would indicate no price difference.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Real GDP and Nominal GDP.
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