Question

The world price of oil has fallen recently. For India (which is a net importer of oil), this development will imply that GDP deflator will fall by more than the CPI.

Answer 1

Answer- False

Explanation- GDP deflator will not fall by more than the CPI (Consumer Price Index) for India when the world price of oil has fallen because India produces very less amount of oil or gasoline and due to this reason the fall in the price of oil worldwide will not affect the GDP deflator more but it will lead to falling in CPI. As GDP (gross domestic product) deflator refers to change in prices of the production of goods and services within the country in an accounting year. On the other hand, the consumer price index (CPI) refers to the current prices of goods and services produced or manufactured within the country in a given year.