Suppose the GDP deflator is currently 121 while the equilibrium GDP deflator is 128. In this instance:

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Quizplus · Accepted Answer

An excess demand for goods and services in the economy typically leads to an increase in prices, as suppliers can charge more due to the higher demand. This would cause the GDP deflator, which is a measure of the level of prices of all new, domestically produced, final goods and services in an economy, to increase towards the equilibrium level.

Suppose the GDP Deflator Is Currently 121 While the Equilibrium