The GDP Deflator in Year 2 Is 105, Using Year

question 206

Multiple Choice

The GDP deflator in year 2 is 105, using year 1 as the base year.This means that, on average, the cost of goods and services is

• A)5% higher in year 2 than in year 1.
• B)105% higher in year 2 than in year 1.
• C)5% higher in year 1 than in year 2.
• D)105% higher in year 1 than in year 2.
• E)95% higher in year 2 than in year 1.

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Definitions:

Average Variable Cost

Total variable costs divided by the quantity of output, showing the variable cost per unit of output.

Marginal Cost

The price to produce an additional unit of a product or service.

Total Costs

The total expense of manufacturing that encompasses all constant and fluctuating costs.

Average Variable Cost

The cost of labor and materials divided by the quantity of output, representing the variable cost per unit of production.