The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2005 and 2015.
Quantities Produced Prices
TABLE 20-6
-Refer to Table 20-6.If 2005 is the base year,the GDP deflator in 2015 was

Question

The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2005 and 2015.
Quantities Produced Prices
  TABLE 20-6
-Refer to Table 20-6.If 2005 is the base year,the GDP deflator in 2015 was

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate nominal GDP and real GDP for both years:

Nominal GDP 2005 = (10 x $2) + (100 x $10) = $1,020
Real GDP 2005 = (10 x $2) + (100 x $5) = $510
GDP deflator 2005 = (Nominal GDP 2005 / Real GDP 2005) x 100 = (1020/510) x 100 = 200

Nominal GDP 2015 = (20 x $4) + (200 x $20) = $4,020
Real GDP 2015 = (20 x $2) + (200 x $10) = $2,020
GDP deflator 2015 = (Nominal GDP 2015 / Real GDP 2015) x 100 = (4020/2020) x 100 = 199.0099 or 131.67 (rounded to two decimal places)

Therefore, the GDP deflator in 2015 was 131.67, when 2005 is the base year. The correct answer is D.

The Table Below Shows the Total Output and Prices for an Economy