The price level can be derived as ________ and is called the ________.
A) Price level = Nominal GDP ÷ Real GDP; CPI
B) Price level = Nominal GDP $\times$Real GDP; CPI
C) Price level = Real GDP $\times$ Nominal GDP; GDP deflator
D) Price level = Real GDP ÷ Nominal GDP; Paasche deflator
E) Price level = Nominal GDP ÷ Real GDP; GDP deflator

Question

Quizplus · Accepted Answer

The price level is derived as Nominal GDP ÷ Real GDP and is called the GDP deflator. Option E is the only one that correctly identifies the formula and the name of the index. Option A is incorrect because it uses the formula for the GDP deflator, but labels it as the CPI. Option B and C both have incorrect formulas for finding the price level. Option D is the formula for the Paasche deflator, which is not mentioned in the question stem.

The Price Level Can Be Derived as ________ and Is ×\times×

The Price Level Can Be Derived as ________ and Is $\times$