The quantity of real GDP demanded equals $12.2 trillion when the GDP deflator is 90. If the GDP deflator rises to 95, the quantity of real GDP demanded equals
A) $12.2 trillion.
B) less than $12.2 trillion.
C) more than $12.2 trillion.
D) more information is needed to determine if the quantity of real GDP demanded increases, decreases, or does not change.

Question

Quizplus · Accepted Answer

A rising GDP deflator indicates that prices have increased. If the quantity of real GDP demanded remains constant but the price level increases (as indicated by an increase in the GDP deflator), it means that the nominal GDP has increased. Therefore, the real GDP demanded in dollars would be lower than $12.2 trillion.

The Quantity of Real GDP Demanded Equals $12