Question

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is Group of answer choices 125, and this indicates that the price level has increased by 125 percent since the base year. 125, and this indicates that the price level has increased by 25 percent since the base year. 80, and this indicates that the price level has decreased by 20 percent since the base year. 80, and this indicates that the price level has increased by 80 percent since the base year.

Answer 1

125, and this indicates that the price level has increased by 25 percent since the base year.

Step-by-step explanation:

GDP deflator =
`(nominal GDP )/(Real GDP)` × 100

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

Nominal GDP is GDP calculated using current year prices

Real GDP is GDP calculated using base year prices. Real GDP has been adjusted for inflation

GDP deflator =
`(10)/(8)` × 100 = 125%

It means that there has been a 25% increase in price