The CPI differs from the GDP deflator in that a. the CPI is an inflation index,...
The CPI differs from the GDP deflator in that
| a. |
the CPI is an inflation index, while the GDP deflator is a price index. |
|
| b. |
increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. |
|
| c. |
substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. |
|
| d. |
increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI. |
Homework Answers
The CPI measure price change of the goods or services which is bought by the consumer.
The GDP deflator is a measure the change in the price of all goods or services currently produced domestically.
The CPI differs from the GDP deflator is that increase in the prices of domestically produced goods that are sold the US government show up in the GDP deflator but not in the CPI.
Answer: Option (D).
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The CPI differs from the GDP deflator in that
a.
the CPI is an inflation index,...
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