If GDP falls by 25 percent since the base year and output remains the same,then the GDP deflator in the current year is

Question

Quizplus · Accepted Answer

The GDP deflator is the ratio of nominal GDP to real GDP, expressed as a percentage. If output remains the same, the real GDP will remain constant. However, if GDP falls by 25% since the base year, the nominal GDP would also be reduced by 25%. Hence, the ratio of nominal GDP to real GDP in the current year would be 75%. Therefore, the correct answer is C) 75.

If GDP Falls by 25 Percent Since the Base Year