If you have $1,000 and the Gross Domestic Product (GDP)deflator increases from 100 to 120, then
A)the $1,000 will buy 20 percent less of the goods and services produced by society.
B)the $1,000 will buy 20 percent more of the goods and services produced by society.
C)the value of the $1,000 increases.
D)you will be able to buy fewer goods, but the real value of those goods will increase.

Question

Quizplus · Accepted Answer

An increase in the GDP deflator from 100 to 120 means that prices have increased by 20%. Therefore, the $1,000 will only be able to buy 80% (100/120) of what it could before, which is a 20% reduction in purchasing power.

If You Have $1,000 and the Gross Domestic Product (GDP)deflator