The GDP deflator compares the current year's prices to those of which year?
Understand the Problem
The question is asking which year the GDP deflator uses for comparison with current year's prices. It presents multiple choice answers, and the concept of the GDP deflator is central to understanding inflation and economic indicators.
Answer
A base year.
The GDP deflator compares the current year's prices to those of a base year.
Answer for screen readers
The GDP deflator compares the current year's prices to those of a base year.
More Information
The GDP deflator is used to measure inflation by comparing current prices with those of a base year, providing an indication of how much the overall level of prices has changed.
Tips
A common mistake is to confuse the GDP deflator with the Consumer Price Index (CPI); they differ in scope and components.
Sources
- What Is the GDP Price Deflator and Its Formula? - Investopedia - investopedia.com
- Deflators and how we use them in economic estimates - ons.gov.uk
- GDP Deflator - EconPort - econport.org
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