Answer to Question #206731 in Macroeconomics for Lila

Question

GDP deflator takes into account changes in consumption patterns and related quality of goods and services over the period of one year.

Answer 1

The gross domestic product takes into account consumption, investment spending and net exports. We get the gross domestic product deflator by determining the percentage change in nominal and real GDP. The deflator helps economists to compare the levels of economic activity from a year to year. Increase in nominal GDP means prices have increased while increase in real GDP means output has increased. Therefore the GDP deflator is a price index which tracks average prices of goods and services produced in all sectors of the economy over time.

This then makes the above statement to be true.