If you have $1 000 and the GDP deflator increases from 100 to 120,then
A)the $1 000 will buy 20 percent less of the goods and services produced by society.
B)the $1 000 will buy 20 percent more of the goods and services produced by society.
C)the value of the $1 000 increases.
D)you will be able to buy fewer goods,but the real value of those goods will increase.

Question

Quizplus · Accepted Answer

An increase in the GDP deflator from 100 to 120 indicates that prices have gone up by 20%. Therefore, the purchasing power of $1,000 will decrease by 20%, meaning it will be able to buy 20% less of the goods and services produced by society.

If You Have $1 000 and the GDP Deflator Increases