Question
Consider the following statements regarding the GDP
Deflator as an inflation indicator: 1. The GDP Deflator is considered a broad measure of inflation as it reflects the overall price level of the economy. 2. The GDP Deflator is more comprehensive than the CPI because it includes government spending and capital goods. 3. The GDP Deflator is updated less frequently than the CPI and WPI. Which of the above statements are correct?Solution
The GDP Deflator is a broad measure of inflation, as it captures the overall price level in the economy (statement 1 is correct). It is more comprehensive than the CPI because it includes all components of GDP, such as government spending and capital goods (statement 2 is correct). However, it is updated less frequently, typically quarterly or annually, compared to CPI and WPI (statement 3 is correct).
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