Two alternative measures of the overall level of prices are
A)the inflation rate and the consumer price index.
B)the inflation rate and the GDP deflator.
C)the GDP deflator and the consumer price index.
D)the cost of living index and nominal GDP.

Question

Quizplus · Accepted Answer

The GDP deflator and the consumer price index are two alternative measures of the overall level of prices. The GDP deflator measures the changes in prices of all goods and services produced in an economy, whereas the consumer price index measures the changes in prices of goods and services consumed by households. Both measures are important to understand the overall level of inflation in an economy. The inflation rate and the GDP deflator are also closely related, as the inflation rate is the percentage change in the general level of prices as measured by the GDP deflator. However, the choice of the consumer price index and the GDP deflator as the two alternative measures of the overall level of prices is preferable, as it captures the different aspects of inflation that affect different segments of the economy.

Two Alternative Measures of the Overall Level of Prices Are