The GDP Deflator Is Not a Fixed-Quantity Price Index, but the CPI

question 377

Multiple Choice

The GDP deflator is not a fixed-quantity price index, but the CPI is. What is the significance of this fact?

• A)The GDP deflator does not include enough items in its market basket.
• B)A base year cannot be defined for the GDP deflator.
• C)The GDP deflator reflects not only changes in prices, but also changes in consumption patterns as consumers substitute between goods.
• D)The GDP deflator overstates the true rate of inflation, whereas the CPI understates it.

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Definitions:

President's Salary

The compensation awarded to the president of a company, reflecting the level of responsibility and the size and profitability of the company.

Product Cost

The total cost attributed to the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Carrying Cases

Containers or bags designed to protect and transport various items, often used for electronics, instruments, and equipment.

Direct Materials

Direct materials are the raw materials that can be directly associated with the production of goods, easily identifiable and quantifiable costs within the manufacturing process.