If you have $15 000 and the GDP deflator increases from 80 to 100
A)the $15 000 will buy 25 percent more of the goods and services produced by society.
B)the $15 000 will buy 25 percent less of the goods and services produced by society.
C)the value of the $15 000 decreases.
D)the value of the $15 000 remains constant.

Question

Quizplus · Accepted Answer

An increase in the GDP deflator means that prices of goods and services produced in the economy have gone up. With $15,000, one will be able to buy fewer goods and services at the higher prices. The percentage change in purchasing power can be calculated as (100-80)/80 = 0.25 or 25% less purchasing power. Therefore, the answer is B - the $15,000 will buy 25 percent less of the goods and services produced by society.

If You Have $15 000 and the GDP Deflator Increases