When Adjusting Nominal GDP for Price Changes, It Is Preferable

question 102

Multiple Choice

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because

• A) the GDP deflator is calculated for a narrow market basket of goods, approximating those items included in our measure of consumption expenditures.
• B) the GDP deflator calculates changes in the prices of items that more closely approximate those included in GDP.
• C) the GDP deflator is always less than the consumer price index, and therefore, it is a more stable index.
• D) the GDP deflator is the sum of the consumer price index and the wholesale price index.

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