The value of nominal GNP of an economy was र 2500 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 र 3000 crores. Calculate the value of GNP deflator of the year in percentage terms. Has the price level risen between the year and the year under consideration?

Solution

GNP space deflator space space equals space fraction numerator Nominal space GNP over denominator Real space GNP end fraction cross times 100 space space space space space space space space space space space space space space space space space space space space equals space 2500 over 3000 cross times 100 equals 250 over 3 space space space space space space space space space space space space space space space space space space space space space equals space 83.3 %

The price level in the year under consideration as compared to that of base year has not risen rather it has fallen from 100 to 83.3%.

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