Question : Which of the following is the Gross Domestic Product (GDP) Deflator?
Option 1: The ratio of nominal to real GDP
Option 2: The ratio of nominal to real GNP
Option 3: The ratio of nominal to real CPI
Option 4: The ratio of real to nominal GNP
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Correct Answer: The ratio of nominal to real GDP
Solution : The correct option is The ratio of nominal to real GDP .
The GDP deflator is a gauge for changes in an economy's total price level. The formula is used to compute GDP Deflator = (Nominal GDP / Real GDP) * 100 ; Nominal GDP is the GDP in current prices, and Real GDP is GDP calculated using prices from the base year. It makes it possible to compare economic production while considering price changes and helps adjust nominal GDP for inflation. It is a comprehensive indicator that tracks changes in the mean prices of all commodities and services produced in an economy.
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