Which of the following statements is/are correct? 1. GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP of the country. 2. GDP deflator can be used to measure the real GDP of the economy but not the inflation rate. Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Correct answer
Explanation
The correct answer is D, Neither 1 nor 2. Both statements misdescribe the GDP deflator. The deflator is the ratio of nominal GDP to real GDP, multiplied by 100. Because it is worked out from GDP itself, it covers every good and service produced in the economy in that year, and its basket changes from year to year as the pattern of output changes. A fixed, unchanging basket is the mark of indices such as the Consumer Price Index and the Wholesale Price Index, not of the deflator. The deflator is used both to convert nominal GDP into real GDP and to measure inflation: the percentage change in the deflator between two years is an economy-wide inflation rate. Option A is wrong because the deflator's basket is not fixed. Option B is wrong because the deflator does measure inflation. Option C is wrong because both statements are false. Exam tip: GDP deflator = nominal GDP / real GDP x 100, with a changing basket that covers the whole of GDP.
Practice Questions
View allWhich one of the following is not a dimension of the Human Development Index?
- A.A long and healthy life
- B.Knowledge
- C.Access to banking and other financial provisions
- D.A decent standard of living
Show answer
The Human Development Index of the UNDP has only three dimensions, and financial access is not one of them.
Read the full explanation →Which of the following are considered to be the four pillars of human development?
- A.Equity, inclusion, productivity and empowerment
- B.Equity, productivity, empowerment and sustainability
- C.Productivity, gender, inclusion and equity
- D.Labour, productivity, inclusion and equity
Show answer
These are the four pillars of human development set out by the economist Mahbub ul Haq, who led the team that prepared the first Human Development Report for the UNDP in 1990, working closely with Amartya Sen.
Read the full explanation →Which of the following statements is/are correct?
1. A price index captures the change in the average price of a constant basket of commodities.
2. If the price index takes values 100, 110 and 121 in three consecutive years respectively, then the inflation rates in the 2nd and 3rd years are 10% and 21% respectively.
Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
Statement 1 defines a price index correctly, but statement 2 gets the third year's inflation wrong. A price index such as the Consumer Price Index tracks the cost of a fixed basket of goods and services over time, compared with a base year whose value is set at 100.
Read the full explanation →Which of the following is/are social security scheme(s) ?
1. Atal Pension Yojana
2. Pradhan Mantri Jeevan Jyoti Bima Yojana
3. Pradhan Mantri Suraksha Bima Yojana
Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1, 2 and 3
- D.1 and 3 only
Show answer
All three are social security schemes, launched together by the Government of India on 9 May 2015 to give pension and insurance cover to ordinary people, especially in the unorganised sector.
Read the full explanation →Which one of the following is NOT a target of the 12th Five-Year Plan ?
- A.Real GDP Growth Rate of 8 per cent
- B.Agriculture Growth Rate of 5 per cent
- C.Manufacturing Growth Rate of 10 per cent
- D.Increase in green cover by 1 million hectare every year during the Plan period
Show answer
The Twelfth Five-Year Plan (2012–17) aimed at 4 per cent growth in agriculture, not 5 per cent. The Twelfth Plan, titled Faster, More Inclusive and Sustainable Growth, was the last five-year plan; after it the Planning Commission was replaced by NITI Aayog in 2015.
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