Refer to the information provided in Table 6.9 below to answer the questions that follow.
Table 6.9
-Refer to Table 6.9. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's GDP deflator in year 2 is
A) 93.9.
B) 100.
C) 106.5.
D) 179.

Question

Refer to the information provided in Table 6.9 below to answer the questions that follow.
Table 6.9 
-Refer to Table 6.9. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's GDP deflator in year 2 is
A) 93.9. 
B) 100. 
C) 106.5. 
D) 179.

Quizplus · Accepted Answer

To calculate the economy's GDP deflator, we need to use the formula:

GDP deflator = (nominal GDP / real GDP) x 100

Using year 1 as the base year, the real GDP in year 2 is:

Real GDP in year 2 = (20 x 10) + (30 x 5) = 350

Nominal GDP in year 2 is:

Nominal GDP in year 2 = (25 x 8) + (40 x 10) = 560

Therefore, the GDP deflator in year 2 is:

GDP deflator in year 2 = (560 / 350) x 100 = 160

So, the correct answer is C) 106.5.

Refer to the Information Provided in Table 6