Understanding GDP and the GDP Deflator

What is the primary difference between nominal GDP and real GDP?

• Nominal GDP includes inflation, while real GDP does not.

• Real GDP is calculated using current year prices.

• Real GDP includes inflation, while nominal GDP does not.

• Nominal GDP is always higher than real GDP.

Which of the following best describes the GDP deflator?

• A measure of consumer price changes.

• An indicator of the inflation rate for the entire economy.

• A tool to calculate the real GDP.

• A measure of the total output of a country.

How is the GDP deflator calculated?

• By dividing real GDP by nominal GDP and multiplying by 100.

• By dividing nominal GDP by real GDP and multiplying by 100.

• By adding nominal GDP and real GDP.

• By subtracting real GDP from nominal GDP.

What does a GDP deflator value of 150 indicate?

• The nominal GDP is 50% of the real GDP.

• Prices have increased by 50% since the base year.

• The economy is experiencing deflation.

• Prices have decreased by 50% since the base year.

If the GDP deflator is below 100, what does it signify?

• The nominal GDP is greater than the real GDP.

• The economy is experiencing deflation.

• The base year prices are higher than the current year prices.

• The economy is experiencing inflation.