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7 Jul 2019

What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

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Patrina Schowalter
Patrina SchowalterLv2
8 Jul 2019
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Related questions

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because:
 
(i) the CPI better reflects the goods and services bought by consumers.
(ii) the CPI is easier to measure.
(iii) the CPI is calculated more often than the GDP deflator is.
(iv) the GDP deflator cannot be used to gauge inflation.

 

The percent increase in the CPI from one year to the next is a measure of the
 
a) Inflation Rate
 
b) GDP Deflator
 
c) Unemployment Rate
 
d) Real Interest Rate

What is the key difference between the Consumer Price Index​(CPI) and the GDP​ deflator?

A. The two indexes measure price changes for different ​"baskets" of products.

B. The GDP deflator includes​ imports, while the CPI only includes domestically produced goods and services.

C. The formulas used to construct the indexes bear little resemblance to each other.

D. The CPI is broader in coverage than is the GDP deflator.

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