Question

The GDP deflator in year 2 is 95 using year 1 as a base year. This means that, on average, the price of goods and services is Group of answer choices 105% higher in year 2 than in year 1. 5% higher in year 2 than in year 1. 105% higher in year 1 than in year 2. 5% higher in year 1 than in year 2.

Answer 1

5% higher in year 1 than in year 2.

Step-by-step explanation:

As we know that the GDP deflator in year 1 or in base year it should always be 100

Also the GDP deflator in year 2 is 95

Now as we can see that the GDP for year 1 is more than GDP for year 2 by 5%

Therefore in year 1, it is 5% higher than in year 2

So, the last option is correct

hence, the same is to be considered