The GDP Deflator Is

question 129

Multiple Choice

The GDP deflator is

• A) an index that utilizes a consumer's market basket of goods in calculating the inflation rate.
• B) the most general indicator of inflation since it measures changes in the prices of all goods and services in the economy.
• C) an index used to calculate inflation at the wholesale level.
• D) the least used index because it is so costly to calculate.

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Definitions:

Market Wage

The prevailing pay rate for work of a given nature in a specific market or industry.

Labor Supply

The total hours that workers are willing and able to work in a given period, often influenced by factors like wages, working conditions, and social norms.

Capital

Financial assets or the financial value of assets, such as cash and goods, used to generate wealth through investment or production.

Factor Substitution Effect

The process by which firms replace factors of production (like labor and capital) with others due to changes in relative prices or technology.