ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: Ans: I, II, and II are true.

Detailed explanation-2: -Economists believe that the GDP deflator is a more accurate measure of inflation because it includes all goods and services, while CPI only covers the price fluctuations of a fixed basket of goods. The formula for the GDP deflator is nominal GDP divided by real GDP.

Detailed explanation-3: -What is the GDP Price Deflator? A measure of inflation in the prices of goods and services produced in the United States, including exports. The gross domestic price deflator closely mirrors the GDP price index, although they are calculated differently.

Detailed explanation-4: -The CPI or RPI assigns fixed weights to the prices of different goods, whereas the GDP deflator assigns changing weights. In other words, the CPI or RPI is computed using a fixed basket of goods, whereas the GDP deflator allows the basket of goods to change over time as the composition of GDP changes.

Detailed explanation-5: -The GDP deflator is a more accurate indicator of inflation because it includes all the goods and services in the economy, so it doesn’t have this limitation of a fixed basket of goods. The GDP deflator is considered by economists to be the best measure of changes in the price level of a nation’s gross domestic product.