If you have $1 000 and the GDP deflator increases from 112 to 120,then
A)the value of the $1 000 increases.
B)the $1 000 will buy 7 percent more of the goods and services produced by society.
C)the $1 000 will buy 7 percent less of the goods and services produced by society.
D)you will be able to more goods,but the real value of those goods will decrease at the same time.

Question

Quizplus · Accepted Answer

The GDP deflator is a measure of the overall price level in an economy. An increase from 112 to 120 represents a 7.14% increase in prices. Therefore, the purchasing power of $1 000 would decrease by the same percentage, meaning it would be able to buy 7.14% less of the goods and services produced by society.

If You Have $1 000 and the GDP Deflator Increases