If you have $2 000 and the GDP deflator decreases from 120 to 110,then
A)the value of the $1 000 decreases.
B)the $1 000 will buy 8.3 percent less of the goods and services produced by society.
C)the $1 000 will buy 8.3 percent more of the goods and services produced by society.
D)you will be able to less goods,but the real value of those goods will decrease at the same time.

Question

Quizplus · Accepted Answer

The GDP deflator decreasing from 120 to 110 indicates that prices have fallen, meaning your money can buy more goods and services than before. The calculation for the percentage change in purchasing power is (new deflator - old deflator) / old deflator * 100 = (110 - 120) / 120 * 100 = -8.3%. A negative percentage indicates a decrease in the price level, so your money's value increases, allowing you to buy 8.3% more goods and services.

If You Have $2 000 and the GDP Deflator Decreases