In which of the following cases would there be an effect on the value of the U.S.consumer price index,but not on the value of the U.S.GDP deflator?
A)All of the truck tires that are produced by a certain company in South Korea are sold to the U.S.military,and the price of these tires decreases.
B)All of the truck tires that are produced by a certain company in California are sold to the U.S.military,and the price of these tires decreases.
C)Most of the bananas that are produced by a certain company in Honduras end up in U.S.grocery stores,and the price of these bananas increases.
D)Most of the earth-moving machines that are produced by a certain company in Illinois are exported to other countries,and the price of these machines increases.

Question

Quizplus · Accepted Answer

The increase in the price of bananas produced by a company in Honduras would affect the U.S. consumer price index since it is a consumer good that is directly purchased by U.S. consumers. However, it would not affect the GDP deflator since it is an imported good and not produced domestically.

In Which of the Following Cases Would There Be an Effect