If the price of domestically produced power tools increases,then
A)the consumer price index and the GDP deflator will both increase.
B)the consumer price index will increase,and the GDP deflator will be unaffected.
C)the consumer price index will be unaffected,and the GDP deflator will increase.
D)the consumer price index and the GDP deflator will both be unaffected.

Question

Quizplus · Accepted Answer

The consumer price index (CPI) measures the average change in prices over time for a basket of goods and services purchased by consumers. The GDP deflator measures the average change in prices over time for all goods and services produced in the economy. If the price of domestically produced power tools increases, then the CPI will increase because consumers will have to pay more for power tools. The GDP deflator will also increase because power tools are a part of GDP.

If the Price of Domestically Produced Power Tools Increases,then