The GDP deflator in year 4 is 120 and the GDP deflator in year 5 is 130. The rate of inflation between years 4 and 5 is
A) -10%.
B) 7.7%.
C) 8.33%.
D) 10%.

Question

Quizplus · Accepted Answer

The formula for calculating the rate of inflation using GDP deflator is:
Rate of inflation = ((new GDP deflator - old GDP deflator) / old GDP deflator) x 100%
= ((130 - 120) / 120) x 100%
= (10 / 120) x 100%
= 8.33%
Therefore, the rate of inflation between years 4 and 5 is 8.33%.

The GDP Deflator in Year 4 Is 120 and the GDP