The price of milk increases dramatically,causing a 0.5 percent increase in the CPI.The price increase will most likely cause the GDP deflator to increase by
A)more than 0.5 percent.
B)less than 0.5 percent.
C)0.5 percent.
D)None of the above is correct;this particular price increase will not affect the GDP deflator.

Question

Quizplus · Accepted Answer

The GDP deflator measures the overall price level of goods and services produced domestically, and milk is just one product among many. Therefore, the increase in the price of milk is not likely to have a significant impact on the overall price level, resulting in a smaller increase or no increase at all in the GDP deflator compared to the 0.5 percent increase in the CPI.

The Price of Milk Increases Dramatically,causing a 0