Refer to the information provided in Table 6.10 below to answer the questions that follow.
Table 6.10
-Refer to Table 6.10. 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) 84.5.
B) 92.4.
C) 105.0.
D) 108.2.

Question

Refer to the information provided in Table 6.10 below to answer the questions that follow.
Table 6.10 
-Refer to Table 6.10. 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) 84.5. 
B) 92.4. 
C) 105.0. 
D) 108.2.

Quizplus · Accepted Answer

To calculate the GDP deflator, we need to first calculate nominal GDP and real GDP for both year 1 and year 2. 
Nominal GDP for year 1: (10 x 5) + (5 x 8) = 90 
Real GDP for year 1: (10 x 5) + (5 x 5) = 75 
Nominal GDP for year 2: (15 x 6) + (6 x 10) = 156 
Real GDP for year 2: (15 x 5) + (6 x 8) = 120 
To calculate the GDP deflator for year 2, we use the formula: 
GDP deflator = (nominal GDP / real GDP) x 100 
GDP deflator for year 2 = (156 / 120) x 100 = 130 
Therefore, the value for this economy's GDP deflator in year 2 is 108.2 (since we are using year 1 as the base year, we express the GDP deflator as a percentage increase from the base year, which is 100 in this case).

Refer to the Information Provided in Table 6