Asked by richard chiem on May 16, 2024
Verified
Statement I: The CPI and the GDP deflator are similar concepts,but the GDP deflator is a broader measure.
Statement II: The CPI and the GDP deflator are inversely related,so when the CPI rises,the GDP deflator declines.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
CPI
Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to assess price changes associated with the cost of living.
GDP Deflator
A price index used to measure price changes in the items that go into GDP.
- Interpret changes in the Consumer Price Index (CPI) and its implications for economic health.
Verified Answer
DD
Dreeana DavisMay 18, 2024
Final Answer :
A
Explanation :
Statement I is true because both the CPI and the GDP deflator are measures of inflation, but the GDP deflator accounts for changes in the prices of all goods and services produced in an economy, while the CPI only measures the price changes in a fixed basket of consumer goods and services.
Statement II is false because the CPI and the GDP deflator are not inversely related. They generally move in the same direction because both measures attempt to gauge the general price level in an economy.
Statement II is false because the CPI and the GDP deflator are not inversely related. They generally move in the same direction because both measures attempt to gauge the general price level in an economy.
Learning Objectives
- Interpret changes in the Consumer Price Index (CPI) and its implications for economic health.