The GDP deflator or price index equals:
A) Gross private domestic investment less the consumption of fixed capital
B) Gross national product less net foreign factor income earned in the United States
C) Nominal GDP divided by real GDP
D) Real GDP divided by nominal GDP

Question

Quizplus · Accepted Answer

The GDP deflator or price index is calculated by dividing the nominal (current-year) GDP by the real (constant-dollar) GDP, and then multiplying by 100. This gives us a measure of the overall level of prices in the economy, and how they have changed over time. Therefore, the correct option is C - Nominal GDP divided by real GDP.

The GDP Deflator or Price Index Equals