In general,if a consumer good is produced domestically and consumed domestically,an increase in its price will have which of the following effects?
A)The consumer price index will increase relatively more than will the GDP deflator.
B)The consumer price index and the GDP deflator will increase by the same amount.
C)The consumer price index will increase relatively less than will the GDP deflator.
D)One cannot generalize about the increase in the consumer price index relative to the increase in the GDP deflator.

Question

Quizplus · Accepted Answer

The consumer price index (CPI) measures the average change in prices paid by consumers for goods and services, while the GDP deflator measures the change in prices of all domestically produced goods and services. Since the good is produced and consumed domestically, its price increase will have a more significant impact on the CPI than on the GDP deflator, which includes a broader range of goods and services.

In General,if a Consumer Good Is Produced Domestically and Consumed