Changes in the relative prices of goods causes problems measuring real GDP because
A) consumers change their buying habits.
B) consumers buy less of the cheaper good.
C) firms produce more of the cheaper good.
D) price deflators only measure the price level.
E) they tend to be inaccurate.

Question

Quizplus · Accepted Answer

Changes in the relative prices of goods can lead to consumers changing their buying habits, which makes it difficult to measure the real GDP accurately. For example, if the price of apples falls, consumers may buy more apples and less of other goods, which would affect the composition of GDP.

Changes in the Relative Prices of Goods Causes Problems Measuring