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If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is a. 120, and this indicates that the price level has increased by 20 percent since the base year. b. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year. c. 120, and this indicates that the price level has increased by 120 percent since the base year. d. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.

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Answer:

a. 120, and this indicates that the price level has increased by 20 percent since the base year.

Explanation:

Nominal GDP is the amount of goods and services produced by a country taking inflation and deflation into account. Real GDP is the amount of goods and services produced in a country based on prices of a base year. a base year is a chosen year that is used as a reference.

GDP deflator is calculated as follows:

Nominal GDP ÷ Real GDP × 100

( 12 trillion ÷ 10 trillion ) x 100

= 120

the change ∴ is an increase in 20% from the base year

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