Nominal GDP is $10,000 billion in 2011, but real GDP is only $9,000. It follows that:
A)the GDP deflator is equal to 111.
B)the GDP deflator is equal to 100.
C)the GDP deflator is equal to 90.
D)prices must have decreased relative to the base year.

Question

Nominal GDP is $10,000 billion in 2011, but real GDP is only $9,000. It follows that:
A)​the GDP deflator is equal to 111.
B)​the GDP deflator is equal to 100.
C)​the GDP deflator is equal to 90.
D)​prices must have decreased relative to the base year.

Quizplus · Accepted Answer

The GDP deflator is calculated as (Nominal GDP / Real GDP) * 100. Using the given figures, (10,000 / 9,000) * 100 = 111.1, which rounds to 111, indicating that prices have increased relative to the base year.

Nominal GDP Is $10,000 Billion in 2011, but Real GDP