Question

If national income accountants fail to make an adequate adjustment for increases in the quality of goods and services over time:
a. real GDP will overstate the growth rate of real output.
b. the GDP deflator will underestimate inflation.
c. the GDP deflator will overestimate inflation.
d. real GDP will overstate the growth of real output, and the GDP deflator will understate inflation.

Answer 1

Answer:

C.

Explanation:

If national income accountants fail to make an adequate adjustment for increases in the quality of goods and services over time this will result in the GDP delflator will overestimate inflation.

GDP is Gross Domestic Product and calculate as the monetary value of goods and services produced in country in financial year. Whereas Inflation is state of increase in price and fall in purchasing value of money.