If the GDP deflator is greater than 100, then
A) nominal GDP is greater than real GDP.
B) nominal GDP is lower than real GDP.
C) nominal GDP equals real GDP.
D) prices decreased by more than half between the current and the base years.

Question

Quizplus · Accepted Answer

The GDP deflator measures the overall level of prices in the economy. If the GDP deflator is greater than 100, it means that prices have increased compared to the base year (which is set at 100 for the deflator calculation). This means that nominal GDP (which is calculated using current prices) will be higher than real GDP (which is calculated using constant prices from the base year).

If the GDP Deflator Is Greater Than 100, Then