An increase in the price of goods bought by firms and the government will show up in:Group of answer choicesthe GDP deflator but maybe not in the CPI.both the CPI and the GDP deflator.neither the CPI nor the GDP deflator.the CPI but not in the GDP deflator.
Question
An increase in the price of goods bought by firms and the government will show up in:Group of answer choicesthe GDP deflator but maybe not in the CPI.both the CPI and the GDP deflator.neither the CPI nor the GDP deflator.the CPI but not in the GDP deflator.
Solution
The correct answer is: "the GDP deflator but maybe not in the CPI."
Here's why:
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The GDP deflator is a measure of the price level of all domestically produced final goods and services in an economy. It includes what firms, the government, and consumers buy. So, if the price of goods bought by firms and the government increases, it will show up in the GDP deflator.
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The Consumer Price Index (CPI), on the other hand, measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. So, it primarily reflects the prices of goods and services bought by consumers, not firms or the government. Therefore, an increase in the price of goods bought by firms and the government may not necessarily show up in the CPI.
Similar Questions
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