Multiple choice

Implicit GDP deflator is a:

  1. current year weighted index

  2. base year weighted index

  3. arithmetic mean of A.and B.

  4. geometric mean of A. and B
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The implicit GDP deflator is calculated as the ratio of nominal GDP to real GDP. Real GDP uses base year prices to value current year output, making the deflator a base-year weighted index. Unlike CPI which uses a fixed basket of goods (Laspeyres index), the GDP deflator uses current output quantities valued at base year prices, allowing the basket to change over time.

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