Question:
GDP Deflator is used to measure:
GDP Deflator is used to measure:
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Unlike the Consumer Price Index (CPI), which only tracks a "basket" of consumer goods, the GDP Deflator is broader because it includes everything produced in the country (including capital goods and government services).
Updated On: May 14, 2026
- Unemployment rate
- Inflation in the economy
- Poverty ratio
- Fiscal deficit
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The Correct Option is B
Solution and Explanation
Step 1: Understanding the Concept:
The GDP Deflator is an index that measures the change in price levels of all new, domestically produced, final goods and services in an economy.
Step 2: Detailed Explanation:
The GDP Deflator is calculated using the formula: \[ \text{GDP Deflator} = \left( \frac{\text{Nominal GDP}}{\text{Real GDP}} \right) \times 100 \]
• Nominal GDP: Measured at current market prices.
• Real GDP: Measured at constant base-year prices. By comparing these two, the deflator shows how much of the increase in GDP is due to higher prices (inflation) rather than an increase in actual output.
Step 3: Final Answer:
The GDP Deflator is a tool used to measure inflation.
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