Answer:
The value of GDP deflator was 1.67.
Explanation:
GDP deflator measures the inflation or change in price level. It is measured by calculating the ratio of nominal GDP and real GDP.
Nominal GDP is based on current market prices, whereas real GDP is based on constant or base prices.
The price of apples in 2002 is $0.5 and quantity is 4.
The price of oranges in 2002 is $1 and quantity is 3.
The price of apples in 2009 is $1 and quantity is 5.
The price of oranges in 2009 is $1.50 and quantity is 5.
Nominal GDP in 2009
= [tex](\$1\times 5) + (\$1.50\times 5)[/tex]
= $5 + $7.5
= $12.5
Real GDP on 2002 prices
= [tex](\$ 0.5 \times 5) + (\$1 \times 5)[/tex]
= $2.5 + $5
= $7.5
GDP deflator
= [tex]\frac{Nominal/ GDP}{Real/ GDP}[/tex]
= [tex]\frac{\$12.5}{\$7.5}[/tex]
=1.67
