Which of the following statements is/are correct? 1. GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP of the country. 2. GDP deflator can be used to measure the real GDP of the economy but not the inflation rate.

Both statements are incorrect. Statement 1 is wrong because the GDP deflator does NOT use an unchanging (fixed) basket — unlike CPI/WPI which use a fixed basket, the deflator is the ratio of nominal GDP to real GDP and reflects the changing composition of currently produced goods and services. Statement 2 is wrong because the GDP deflator is widely used to measure inflation (the percentage change in the deflator is the inflation rate based on the deflator); it is also used to convert nominal GDP to real GDP. Hence both uses — real GDP estimation and inflation measurement — are valid for the deflator.