The CPI differs from the GDP deflator in that
A)the CPI is a price index, while the GDP deflator is an inflation index.
B)substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)increases in the prices of foreign produced goods that are sold to U.S.consumers show up in the CPI but not in the GDP deflator.
D)increases in the prices of domestically produced goods that are sold to the U.S.government show up in the CPI but not in the GDP deflator.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) includes the prices of goods and services, including those produced abroad, that are purchased by consumers, whereas the GDP deflator measures the prices of all domestically produced goods and services in the economy, regardless of whether they are consumed by individuals, the government, or foreigners. Thus, increases in the prices of foreign-produced goods that are sold to U.S. consumers affect the CPI but not the GDP deflator.

The CPI Differs from the GDP Deflator in That