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

question 179

Multiple Choice

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.

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Definitions:

Receipts

Written acknowledgments of having received something, typically used for transactions and proof of payment.

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid.

Cash Basis

An accounting method where revenues and expenses are recognized when cash is received or paid, not when incurred.

Operations

The day-to-day activities required for the running of a business or an organization, focusing on the production and delivery of goods and services.