If the price of Italian shoes imported into the United States increases, then
A)both the GDP deflator and the consumer price index will increase.
B)neither the GDP deflator nor the consumer price index will increase.
C)the GDP deflator will increase, but the consumer price index will not increase.
D)the consumer price index will increase, but the GDP deflator will not increase.

Question

Quizplus · Accepted Answer

The GDP deflator measures the prices of all goods produced domestically, whereas the consumer price index (CPI) measures the prices of a basket of goods and services purchased by households, including imports. Since Italian shoes are imported, their price increase would affect the CPI but not the GDP deflator, which only accounts for domestically produced goods.

If the Price of Italian Shoes Imported into the United