The GDP deflator is designed to adjust nominal GDP for changes in
A) the level of transfer payments.
B) the quality of goods over time.
C) the costs of economic bads such as pollution and crime.
D) the general level of prices over time.

Question

Quizplus · Accepted Answer

The GDP deflator is a measure of the general price level in an economy and is used to adjust nominal GDP for inflation. Therefore, it is designed to account for changes in the general level of prices over time, making option D the correct choice. Option A is incorrect because transfer payments are not related to adjusting GDP for inflation. Option B is incorrect because the quality of goods is not directly related to shifts in the price level. Option C is incorrect because the GDP deflator does not take into account the costs of economic bads such as pollution and crime.

The GDP Deflator Is Designed to Adjust Nominal GDP for Changes