Which of the following prices are included in the GDP deflator, but not included in the Consumer Price Index?Group of answer choicesfirms' purchases of new equipmentintermediate goods and servicesimportsconsumption goods and services
Question
Which of the following prices are included in the GDP deflator, but not included in the Consumer Price Index?Group of answer choicesfirms' purchases of new equipmentintermediate goods and servicesimportsconsumption goods and services
Solution
The GDP deflator includes the prices of all goods and services produced in an economy, while the Consumer Price Index (CPI) only includes the prices of goods and services bought by consumers.
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Firms' purchases of new equipment: These are included in the GDP deflator because they are part of the investment component of GDP. However, they are not included in the CPI because they are not consumer purchases.
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Intermediate goods and services: These are not included in either the GDP deflator or the CPI. In both measures, only the value of final goods and services is counted to avoid double counting.
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Imports: These are not included in the GDP deflator because they are not produced within the economy. However, they are included in the CPI if they are bought by consumers.
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Consumption goods and services: These are included in both the GDP deflator and the CPI as they are both produced within the economy (thus part of GDP) and bought by consumers.
So, the correct answer is "firms' purchases of new equipment".
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