Assume most athletic apparel bought by U.S.consumers is imported from other nations.If all else is constant,an increase in the price of foreign-made athletic apparel will cause the U.S.
A)consumer price index and GDP deflator to increase by exactly the same amount.
B)GDP deflator to increase more than the consumer price index.
C)consumer price index to increase more than the GDP deflator.
D)GDP deflator to decrease less than the consumer price index.

Question

Quizplus · Accepted Answer

An increase in the price of foreign-made athletic apparel would lead to an increase in the cost of living for U.S. consumers, which is measured by the consumer price index (CPI). Therefore, the CPI would increase more than the GDP deflator because the GDP deflator measures the prices of all goods and services produced domestically, including those used in the production of athletic apparel. Additionally, if the increase in prices leads to a decrease in the quantity of athletic apparel demanded by consumers, this could lead to a decrease in GDP, which would cause the GDP deflator to decrease less than the CPI.

Assume Most Athletic Apparel Bought by U