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The basket of goods included in the GDP deflator includes ..................

  • A.Only Domestically Produced Goods
  • B.Domestic Goods as well as imported goods
  • C.Only capital goods
  • D.Only Consumer Goods

Answer: A

The GDP deflator covers only domestically produced goods.

The GDP deflator is nominal GDP divided by real GDP, so its 'basket' is everything counted in GDP: all final goods and services produced within the country, including capital goods and government purchases, and excluding imports.

That is the key contrast with the consumer price index, which includes imported consumer goods. 'Only capital goods' and 'only consumer goods' each leave out a large part of GDP.

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