Which of the following statements is/are correct?
- 1. GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP of the country.
- 2. GDP 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.
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CDS-1 – 2024
– Statement 2 is incorrect. The GDP deflator is indeed used to calculate Real GDP from Nominal GDP (Real GDP = Nominal GDP / GDP Deflator * 100). However, it is also commonly used as a measure of the economy’s overall inflation rate. Inflation rate between two periods can be calculated from the percentage change in the GDP deflator.