Concept:The GDP deflator is a broad price index for all domestically produced final goods and services, not fixed to a specific basket, and can measure both real GDP and inflation.
Explanation:Statement 1 says the GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP.
This is incorrect because the GDP deflator includes all goods and services produced domestically each year, not a fixed basket.
The basket changes as GDP composition changes — unlike price indices such as CPI which use a fixed basket.
Statement 2 says the GDP deflator can measure real GDP but not the inflation rate.
This is also incorrect because the GDP deflator is directly used to measure inflation.
It is calculated as
Real GDPNominal GDP​×100.
A rising GDP deflator indicates rising prices (inflation) since the base year.
Thus, the deflator can measure both real GDP (by deflating nominal GDP) and the inflation rate.
Therefore, both statements are false.
Answer:Neither 1 nor 2.