If the GDP deflator is now 125,we may conclude that since the base year prices have

A) risen by 25 percent.
B) risen by 125 percent.
C) fallen by 25 percent.
D) fallen by 125 percent.

Question

If the GDP deflator is now 125,we may conclude that since the base year prices haveA) risen by 25 percent.B) risen by 125 percent.C) fallen by 25 percent.D) fallen by 125 percent.

Elijah Bradley · Accepted Answer

Final Answer : A, Explanation :  The GDP deflator measures the price level of all final goods and services produced in an economy. A value of 125 implies that prices have increased by 25% since the base year, which is used as a reference point for comparison. Therefore, option A is the correct answer. Option B and D are incorrect because a 125% increase or 125% decrease in prices would be unrealistic and would indicate a significant economic crisis. Option C is incorrect because it suggests a decrease in prices, which is contrary to the information given in the question.

If the GDP deflator is now 125,we may conclude that since the base year prices have

A) risen by 25 percent.
B) risen by 125 percent.
C) fallen by 25 percent.
D) fallen by 125 percent.

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