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Describe the three factors that make the consumer price index an imperfect measure of the cost of living. Then explain how the GDP deflator differs from the CPI.

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019
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Related questions

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. 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?

How the consumer price index (CPI) is constructed and why it is an imperfect measurement of the cost of living.

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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