Question

Which statement correctly identifies the weights used by GDP Deflator and CPI / WPI?

Options

• GDP Deflator uses Variable weights (changes with production), while CPI / WPI uses Fixed weights.

• Both GDP Deflator and CPI / WPI use Variable weights (changes with production).

• GDP Deflator uses Fixed weights, while CPI / WPI uses Variable weights (changes with production).

• Both GDP Deflator and CPI / WPI use Fixed weights.

Answer 1

GDP Deflator uses variable weights, which change with production. CPI / WPI uses fixed weights for its fixed consumer basket.