The implicit GDP price deflator can be defined as
A) (Nominal GDP + Real GDP) / 2.
B) (Nominal GDP / Real GDP) * 100.
C) Nominal GDP - Real GDP.
D) (Real GDP / Nominal GDP) * 100.
E) the consumer price index.

Question

Quizplus · Accepted Answer

The implicit GDP price deflator is calculated by taking the ratio of nominal GDP to real GDP and multiplying it by 100. It measures the average change in prices of all goods and services in the economy and is often used as a measure of inflation or deflation. Option A is incorrect because dividing the sum of nominal and real GDP by two would not produce a measure of inflation. Option C is incorrect since subtracting real GDP from nominal GDP does not produce a measure of inflation. Option D is incorrect because it calculates the inverse of what the implicit GDP price deflator measures. Option E is incorrect since the consumer price index measures the average change in prices of a basket of goods and services purchased by consumers and is not the same as the implicit GDP price deflator.

The Implicit GDP Price Deflator Can Be Defined as