The following table shows the production and prices of an economy's only two goods,TVs and computers,in 2003 and 2009.Assume that 2003 is the base year.

-The GDP deflator for 2009 is
A) 100.
B) 103.
C) 134.
D) 178.
E) 183.

Question

The following table shows the production and prices of an economy's only two goods,TVs and computers,in 2003 and 2009.Assume that 2003 is the base year.
 
-The GDP deflator for 2009 is
A) 100. 
B) 103. 
C) 134. 
D) 178. 
E) 183.

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate nominal GDP and real GDP for both years.

Nominal GDP 2003 = (100 x $500) + (200 x $1000) = $250,000
Real GDP 2003 = (100 x $500) + (200 x $1000) = $250,000 (base year)

Nominal GDP 2009 = (150 x $600) + (250 x $1200) = $450,000
Real GDP 2009 = (150 x $500) + (250 x $1000) = $325,000

Now we can calculate the GDP deflator for 2009:

GDP deflator 2009 = (Nominal GDP 2009 / Real GDP 2009) x 100
GDP deflator 2009 = ($450,000 / $325,000) x 100
GDP deflator 2009 = 138.46

Therefore, the closest choice is C, 134.

The Following Table Shows the Production and Prices of an Economy's