Question

The value of the Nominal Gross National Product (GNP) of an economy was ₹2,500 crores in a
particular year. The value of GNP of that country during the same year, evaluated at the price of
base year was ₹ 3,000 crores. Calculate the value of GNP deflator of the year in percentage terms.
Has the price level risen between the base year and the year under consideration ?

Answer 1

Explanation:

GNP Deflator =

Real GNP

Nominal GNP

×100=

3,000

2,500

×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.