Which statement about the GDP deflator is true?

• A. Stocks are included in its calculation
• B. Measures price changes of consumer goods only
• C. Depends on imports heavily
• D. Reflects price changes for all goods and services included in GDP

Answer: (D)

The GDP deflator is a price-level measure that captures changes in the prices of all final goods and services that are included in GDP. Because it weights every domestically produced item that makes up GDP—across consumption, investment, government spending, and net exports—it reflects how the overall price level for the entire GDP basket changes over time. It isn’t limited to consumer goods, nor does it rely on imports as part of its calculation (imports aren’t directly included in GDP). This broad scope is why the statement that it reflects price changes for all goods and services included in GDP is true.