If national income accountants fail to make an adequate adjustment for increases in the quality of goods and services over time,
A) real GDP will overstate the growth rate of real output.
B) the GDP deflator will underestimate inflation.
C) the GDP deflator will overestimate inflation.
D) real GDP will overstate the growth of real output, and the GDP deflator will understate inflation.

Question

Quizplus · Accepted Answer

If quality improvements are not adequately adjusted for, the price increases due to quality improvements may be mistaken for inflation, causing the GDP deflator to overestimate inflation.

If National Income Accountants Fail to Make an Adequate Adjustment