Maharashtra State PSC Model Paper 3

The Correct answer is Both 1 and 2.

• Consumer Price Index (CPI) is the index of prices of a given basket of commodities that are bought by the representative consumer. The Gross Domestic Product (GDP) deflator is a measure of general price inflation. It is calculated by dividing nominal GDP by real GDP and then multiplying by 100.
• Comparison between GDP Deflator and CPI:
  • The goods purchased by consumers do not represent all the goods that are produced in a country. Hence the basket of CPI is limited. On the other hand, GDP deflator takes into account all such goods and services. Hence it's the basket is greater than CPI.
  • CPI includes prices of goods consumed by the representative consumer, hence it includes prices of imported goods.
    • GDP deflator does not include the prices of imported goods. Hence statement 1 is correct.
  • The weights are constant in CPI – but they differ according to the production level of each good in GDP deflator. Hence statement 2 is correct.