Q. In what ways GDP deflator is different from Consumer/Wholesale price Index?
1.It takes into account all such goods and services.
2.It includes prices of imported goods.
3.The weights are differing according to production level of each good in GDP deflator.
Choose the correct answer from below given codes:

[A] 1 only

[B] 1 and 2 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: C
Notes:

Explanation: Notice CPI (and analogously WPI) may differ from GDP deflator because

  1. The goods purchased by consumers do not represent all the goods which are produced in a country. GDP deflator takes into account all such goods and services.
  2. CPI includes prices of goods consumed by the representative consumer; hence it includes prices of imported goods. GDP deflator does not include prices of imported goods.
  3. The weights are constant in CPI – but they differ according to production level of each good in GDP deflator.

Source: NCERT – Macro economics