• # question_answer What do you understand by the GDP deflator? 1. It is a comprehensive measure of inflation, implicitly derived from national accounts data as a ratio of GDP at constant prices to current prices. 2. It is a comprehensive measure of inflation, implicitly derived from national accounts data as a ratio of GDP at current prices to constant prices. Which of the above explanations are correct? A)  1 only  B)  2 only C)  Both are correct D)  both are wrong

Correct Answer: B

Solution :

[b] The GDP deflator is an economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level. Also known as the "GDP implicit price deflator."

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