Which of the following measures inflation in ecosystem? 

(A) Phillips curve  

(B) Consumer Price Index 

(C) Misery Index 

(D) GDP deflator  

(E) Fisher effect 

Choose the correct answer from the options given below: 

Key Points

Inflation - Inflation occurs when the prices of goods and services continue to rise over time. Customers' purchasing power is reduced as a result.

Important PointsGDP deflator - 

• The GDP Deflator calculates the average change in prices across all goods and services in the economy. The GDP Deflator calculates the rate of inflation.
• The GDP Deflator is also referred to as the Price Deflator and the Implicit Price Deflator. It measures overall inflation across all goods and services in the economy in comparison to the base year.
• The statistic, however, does not take into account the impact of inflation or rising prices when GDP rises and falls.

Consumer price index - 

• The consumer price index (CPI) is a detailed measure used to estimate price changes in a basket of goods and services that is representative of an economy's consumption expenditure.
• It is the most widely used inflation indicator in India.
• The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics, etc, which consumers buy for use.
• Hence the most important factor of inflation for common people.

Additional Information

Misery index - The misery index is a single statistical tool that computes a country's unemployment and inflation forecast. The misery index indicates whether people are generally happy or unhappy, based on their economic circumstances.

Fisher effect - The Fisher Equation expresses the relationship between nominal and real interest rates, with the difference due to inflation.

Phillips curve - The Phillips curve illustrates the inverse relationship between unemployment and inflation.William Phillips was the first to propose the concept of Phillips Curve.The hypothesis holds that the lower the unemployment rate, the higher the rate of inflation, and vice versa.