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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Definitions:

Tax Evasion

The illegal act of not paying taxes that are legally owed, often by concealing income or inflating deductions.

Intentional Wrongful Disclosure

The deliberate release or sharing of confidential or protected information without permission, usually leading to harm or breach of trust.

Additional Sums

Extra amounts of money required or due on top of the originally agreed upon or standard payment.

Duress

A situation in which a person performs an act as a result of violence, threat, or other pressure against the person.