If you have $5000 and the GDP deflator decreases from 100 to 80
A)the $5000 will buy 20 percent less of the goods and services produced by society.
B)the $5000 will buy 20 percent more of the goods and services produced by society.
C)the value of the $5000 decreases.
D)the value of the $5000 remains constant.

Question

Quizplus · Accepted Answer

When the GDP deflator decreases, it means that the average price level of goods and services in the economy has decreased. This also means that the purchasing power of the dollar has increased. Therefore, the $5000 will be able to purchase more goods and services than before, which is a 20 percent increase.

If You Have $5000 and the GDP Deflator Decreases from 100