Economics • Economic BasicsEasy
What is measured by the Gross Domestic Product (GDP) deflator?
A. The change in prices of all domestically produced goods and services✓ Correct Answer
B. The rate of unemployment in the economy
C. The total value of imports minus exports
D. The consumer price index adjusted for seasonal variations
💡 Solution & Explanation
The Gross Domestic Product deflator measures the ratio of nominal GDP to real GDP expressed as a percentage, reflecting the overall price level changes for all domestically produced goods and services. Unemployment rates and trade balances measure entirely different economic indicators, while seasonal variations are handled by specific index adjustments rather than the deflator. Real GDP is calculated by dividing nominal GDP by the GDP deflator and multiplying by one hundred.
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