Table 23-3

-Refer to Table 23-3.Using the GDP deflator to measure the average level of prices and using 2006 as the base year,the economy's inflation rate is

Question

Table 23-3
 
-Refer to Table 23-3.Using the GDP deflator to measure the average level of prices and using 2006 as the base year,the economy's inflation rate is

Quizplus · Accepted Answer

To calculate the inflation rate, we need to compare the GDP deflator in each year to the base year (2006).

For 2007, we have: 
GDP deflator in 2007 = 125.0 
GDP deflator in 2006 = 100.0

((125.0 - 100.0) / 100.0) x 100% = 25%

For 2008, we have: 
GDP deflator in 2008 = 128.0 
GDP deflator in 2006 = 100.0

((128.0 - 100.0) / 100.0) x 100% = 28%

Therefore, the inflation rate was 25% for 2007 and 28% for 2008. The answer is choice C.

Table 23-3 -Refer to Table 23-3.Using the GDP Deflator to Measure the Deflator