COST ACCOUNTING
PERFORMANCE MEASUREMENT
Question
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Calculate the GDP deflator price index for Utilistan in 2010

100


250


120


220

Explanation:
Detailed explanation1: 1. How to find a GDP deflator? One can find or compute it by dividing the nominal GDP by the real GDP and then multiplying the result by 100. Nominal GDP here is the current price not adjusted to inflation, while the real GDP is the value of the products and services adjusted to the price fluctuations in the market.
Detailed explanation2: Nominal GDP from 2010 to 2011 has increased by 23 percent and the Nominal GDP from 2011 to 2012 has increased by 19.23 percent.
Detailed explanation3: If the GDP deflator is greater than 100, then the economy has seen a positive change in price level since the base year. In other words, the economy has experienced inflation.
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