Is the GDP deflator calculated as 100 times the ratio of nominal GDP to real GDP?

Is the GDP deflator calculated as 100 times the ratio of nominal GDP to real GDP?

• A. It measures unemployment.
• B. True
• C. It is the same as CPI.
• D. False

Answer: (B)

GDP deflator is a broad price measure for all final goods and services produced domestically. It is defined as (nominal GDP / real GDP) × 100. Nominal GDP uses current prices, while real GDP uses base-year prices, so dividing nominal by real removes quantity changes and leaves the overall price level of the GDP basket, then multiplying by 100 puts it in index form. Because of this definition, the statement is true. It isn’t a measure of unemployment, which relates to the labor market, and it isn’t the same as the CPI, which tracks a fixed basket of consumer goods and services rather than all goods and services produced domestically.

GDP deflator is a broad price measure for all final goods and services produced domestically. It is defined as (nominal GDP / real GDP) × 100. Nominal GDP uses current prices, while real GDP uses base-year prices, so dividing nominal by real removes quantity changes and leaves the overall price level of the GDP basket, then multiplying by 100 puts it in index form. Because of this definition, the statement is true.

It isn’t a measure of unemployment, which relates to the labor market, and it isn’t the same as the CPI, which tracks a fixed basket of consumer goods and services rather than all goods and services produced domestically.