| 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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