If the deflator is 108 how much higher is the price level than the base year?
Answer and explanation
Correct answer: 8 percent
A GDP deflator is an index in which the base-year price level is assigned a value of 100. With a deflator of 108, the difference from the base is 108 − 100 = 8 index points, meaning the price level is 8% higher than in the base year. Therefore option A is correct; 108 is the index value, not the percentage increase.
Frequently asked questions
What is the correct answer to this question?
8 percent
Why is this the correct answer?
A GDP deflator is an index in which the base-year price level is assigned a value of 100. With a deflator of 108, the difference from the base is 108 − 100 = 8 index points, meaning the price level is 8% higher than in the base year. Therefore option A is correct; 108 is the index value, not the percentage increase.
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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