Question

The value of the nominal GNP of an economy was Rs. 2,500 crores in a particular year. The value of GNP of that country during the same year, evaluated at the prices of some base year, was Rs. 3,000 crores. Calculate the value of the GNP deflator of the year in percentage terms. Has the price love, risen between the base year and the year under consideration?

Answer 1

$GNP$ Deflator $=\frac{NominalGNP}{RealGNP}\times 100=\frac{2,500}{3,000}\times 100=0.83$
$GNP$ deflator of $0.83$ or $83\%$ indicates that the price level has reduced by $17\%$ between the base year arm the year under consideration.