Question

If the GDP Deflator is 150, which conclusion about real output is correct?

Options

• Real output must have grown 1.5 times.

• Real output may not have grown proportionally.

• Imports are excluded from CPI.

• Prices are equal to base-year levels.

Answer 1

A deflator of 150 shows that prices are 1.5 times base-year levels. Therefore, an increase in Nominal GDP does not mean real output has grown proportionally.