Here,GDPdeflatoris>greaterthan100.Thatmeansthereisinflation.(veryveryheavyinflation)IFitwasnearto100,that’dmean,thereisnodifferenceinrealandnominalGDPhencethereisnoinflationinIndia.We’veWPIandCPItomeasureinflation,buttheydon’tincludeeachandeveryproductandserviceavailableinIndia,whilewithGDPdeflator,wecanget...
However, the GDP Deflator also has limitations. It can be influenced by factors other than changes in prices, such as changes in the composition of goods and services produced. Additionally, it may not accurately reflect price changes for specific consumer goods and services, as it includes a w...
If real GDP is $9.0 million and nominal GDP is $8.8 million, the GDP deflator is _. During an expansion (or recovery), the percent change in ___ will be positive. a) real GDP b) real capita GDP c) CPI d) GDP Defl...
The CPI is a price index and so more accurately captures true inflation, whereas the GDP deflator captures not only price increases but increases in real output. The greater increase in the CPI thus implies that real output rose more slowly tha...
d) GDP Deflator Expansion Path of Business Cycle: When an economy faces the expansionary path of the business cycle, its actual output level will start incrementing with a positive rise in both inflation and employment in the economy. Answer a...
greater than real GDP in 2004. Real GDP in 2004 was $1,750, so real GDP in 2005 equals ($1,750) × (1.1421) = $1,999. 1h. The GDP deflator = (Nominal GDP ÷ Real GDP) × 100 = ($2,625 ÷ $1,999) × 100 = 131. CHECKPOINT20.4:RealGDPandtheStandardofLiving 1. The rela...
When the price level is increasing, real GDP is greater than nominal GDP in years before the base year and less than nominal GDP for years after the base year. The GDP deflator is a measure of the price level, and is calculated by dividing nominal GDP by real GDP, and multiplying by ...
which is the difference in prices between the current year and the base year. For example, if prices rose by 5% since the base year, then the deflator would be 1.05. Nominal GDP is divided by this deflator, yielding real GDP. Nominal GDP is usually higher than real GDP because inflation...
It is found that, in the short term, if economic grow too fast or the money supply increase, the rate of GDP deflator increase greater than CPI. It is opposite that if the investment or foreign exchange reserves increase. In the long term, economic growth impact on both considerable, ...
As such, real GDP provides a better basis for judging long-term national economic performance than nominal GDP. Using aGDP price deflator, real GDP reflects GDP on a per-quantity basis. Without real GDP, it would be difficult to identify just from examining nominal GDP whether production is ...