Consider the following statements about price indices:
(A) Like the GDP deflator, a GNP deflator can also be calculated.
(B) The CPI includes the prices of imported goods bought by the representative consumer.
(C) The GDP deflator includes the prices of imported goods.
(D) In the CPI, the weights of goods change with the production level of each good.
(E) In countries like the USA, the index of wholesale prices is called the Producer Price Index.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (B) and (E) only
The deflator covers all goods produced in the country; the CPI covers the basket a consumer buys.
(A) Like the GDP deflator, a GNP deflator can also be calculated. — Correct. Like the GDP deflator, a GNP deflator can also be found.
(B) The CPI includes the prices of imported goods bought by the representative consumer. — Correct. A consumer buys some imported goods, so the CPI includes their prices.
(C) The GDP deflator includes the prices of imported goods. — Incorrect. The GDP deflator covers goods produced in the country, so it does not include imported goods.
(D) In the CPI, the weights of goods change with the production level of each good. — Incorrect. CPI weights are constant. It is the deflator whose weights follow production.
(E) In countries like the USA, the index of wholesale prices is called the Producer Price Index. — Correct. In the USA the wholesale price index is called the Producer Price Index.
NCERT (2026-27): “2.4 Nominal and Real GDP … Like GDP deflator, we can have GNP deflator as well. …” “2.4 Nominal and Real GDP … Like CPI, the index for wholesale prices is called Wholesale Price Index (WPI). In countries like USA it is referred to as Producer Price Index (PPI). Notice CPI (and analogously WPI) may differ from GDP deflator because |