If you have $5,000 in wealth and the GDP deflator decreases 20 percent, then
A) the $5,000 will buy fewer goods and services.
B) the $5,000 will buy more goods and services.
C) the real value of the $5,000 remains constant.
D) the real value of the $5,000 decreases.

Question

Quizplus · Accepted Answer

If the GDP deflator decreases 20 percent, it means that prices of goods and services have also decreased. Therefore, $5,000 will be able to buy more goods and services as they are cheaper. This results in an increase in the purchasing power of the $5,000.

If You Have $5,000 in Wealth and the GDP Deflator