The GDP Deflator in Year 2 Is 95 Using Year

question 155

Multiple Choice

The GDP deflator in year 2 is 95 using year 1 as a base year. This means that, on average, the price of goods and services is

• A) 105% higher in year 2 than in year 1.
• B) 5% 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.

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Definitions:

Midpoint Formula

A method used in economics to calculate the percentage change in quantity demanded or supplied, given two points, by dividing the change by the midpoint between the two points.

Price Elasticity

An economic concept indicating the responsiveness of the quantity demanded of a product to changes in its price, with high elasticity indicating greater sensitivity.

Foreign Travel

The activity of traveling outside one's home country for leisure, business, or other purposes.

Quantity Demanded

The amount of a good or service consumers are willing and able to purchase at a given price.