Question

Q. Consider the following statements with reference to GDP Deflator:

Which of the statements given above is/are correct?

• A. 1 and 2 only
• B. 2 and 3 only
• C. 3 only
• D. 1, 2 and 3

Answer 1

The correct option is A 1 and 2 only

Explanation:

• The GDP deflator, also known as the implicit price deflator, is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year.
• GDP deflator does not include prices of imported goods and services. It takes into account only the goods and services which are produced within the domestic economy.
• It captures the extent to which the increase in the gross domestic product has happened on account of higher prices rather than an increase in output.
• Since it covers the entire range of goods and services produced in the economy, as against the commodity baskets approach of CPI and WPI, it is seen as a more comprehensive measure of inflation.
• The GDP deflator is available only on a quarterly basis along with GDP estimates. The Ministry of Statistics and Programme Implementation (MOSPI) comes out with GDP deflator in National Accounts Statistics as price indices.