An increase in the price of bread produced domestically will be reflected in
A)both the GDP deflator and the consumer price index.
B)neither the GDP deflator nor the consumer price index.
C)the GDP deflator but not in the consumer price index.
D)the consumer price index but not in the GDP deflator.

Question

Quizplus · Accepted Answer

Both the GDP deflator and the consumer price index (CPI) measure inflation, but they do so from different perspectives. The GDP deflator reflects the prices of all domestically produced goods and services, while the CPI measures the prices of a basket of goods and services purchased by households, including bread. Therefore, an increase in the price of domestically produced bread would be reflected in both the GDP deflator and the CPI.

An Increase in the Price of Bread Produced Domestically Will