The GDP deflator is designed to
A) adjust nominal GDP for changes in the unemployment rate.
B) adjust nominal GDP so as to include the problem of externalities.
C) adjust nominal GDP for changes in the price level.
D) calculate changes in the price of food and other consumer goods.

Question

Quizplus · Accepted Answer

The GDP deflator is a measure of the price level in an economy. It is used to adjust nominal GDP for changes in prices, providing a clearer picture of real economic growth. Choice A is incorrect because the unemployment rate is not directly related to the price level. Choice B is incorrect because externalities are not directly related to GDP or the price level. Choice D is incorrect because the GDP deflator measures the overall price level, not just the prices of specific goods.

The GDP Deflator Is Designed to