Under what circumstances would the GDP deflator be less than 100 after the base year?
A)The GDP deflator will be less than 100 if there has been inflation relative to the base year.
B)The GDP deflator will be less than 100 if there has been inflation of less than 2% per year relative to the base year.
C)The GDP deflator will be less than 100 if there has been deflation relative to the base year.
D)There are no circumstances under which the GDP deflator could be less than 100.

Question

Quizplus · Accepted Answer

The GDP deflator measures the level of prices in an economy, so if there has been deflation (a decrease in the overall level of prices) relative to the base year, the GDP deflator could be less than 100. This would mean that goods and services are cheaper in current years compared to the base year.

Under What Circumstances Would the GDP Deflator Be Less Than