The GDP Deflator Is a Measure Ofthe Overall Change in Prices

question 120

Multiple Choice

The GDP deflator is a measure ofthe overall change in prices in an economy:

• A) using the ratio of nominal to real GDP.
• B) based on goods and services valued at constant prices.
• C) based on price-changes determined when output is held constant.
• D) using the ratio of real to nominal GDP.

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Definitions:

Downward-sloping

A graphical representation indicating a negative relationship between two variables, such as price and quantity demanded in the demand curve.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, quantitatively expressed as the percentage change in quantity demanded divided by the percentage change in price.

Inelastic

An inelastic good or service has a demand that does not change significantly when its price goes up or down.

Insensitive to Price

A characteristic of demand wherein the quantity demanded by consumers changes very little with a change in the product's price.