Assertion (A): A rise in the price of imported mobile phones bought by consumers raises the CPI but not the GDP deflator.
Reason (R): The CPI includes prices of imported goods consumed by the representative consumer, while the GDP deflator does not include prices of imported goods.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): A rise in the price of imported mobile phones bought by consumers raises the CPI but not the GDP deflator. — True. Imported phones are in the consumer’s basket, so their price rise raises the CPI; it leaves the GDP deflator unchanged.
Reason (R): The CPI includes prices of imported goods consumed by the representative consumer, while the GDP deflator does not include prices of imported goods. — True. The CPI includes import prices; the GDP deflator does not.
Why R explains A?
The GDP deflator covers only goods produced in the country, so an imported phone is not in it. The CPI covers what the consumer buys, imports included. That is why only the CPI moves.
NCERT (2026-27): “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 |