The GDP deflator measures the overall change in prices in an economy:
A) by calculating the ratio of nominal to real GDP.
B) based on goods and services valued at constant prices.
C) based on price-changes determined when output is held constant.
D) by calculating the ratio of real to nominal GDP.

Question

Quizplus · Accepted Answer

The GDP deflator is calculated by dividing nominal GDP by real GDP and then multiplying by 100. It reflects the overall change in prices by comparing the current prices of goods and services to the prices of those same goods and services in a base year.

The GDP Deflator Measures the Overall Change in Prices in an Economy