2024 · Q23
Which of the following statements is/are correct?
- 1GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP of the country.
- 2GDP deflator can be used to measure the real GDP of the economy but not the inflation rate.
Select the correct answer using the code given below.
General KnowledgeIndian Economy
- A1 only
- B2 only
- CBoth 1 and 2
- DNeither 1 nor 2
Explanation
Statement 1 is incorrect: the GDP deflator uses the current-year basket of goods and services (it is a Paasche index), whereas it is the CPI that uses an unchanging basket. Statement 2 is incorrect: the GDP deflator is precisely used to measure inflation — the inflation rate equals the percentage change in the deflator — and dividing nominal GDP by the deflator gives real GDP. Since neither statement is correct, the answer is (D).