The Consumer Price Index and the GDP Deflator Are Two

question 90

Multiple Choice

The consumer price index and the GDP deflator are two alternative measures of the overall price level.Which of the following statements about the two measures is correct?

• A)The CPI involves a base year;the GDP deflator does not involve a base year.
• B)The CPI can be used to compute the inflation rate;the GDP deflator cannot be used to compute the inflation rate.
• C)The CPI reflects the prices of goods and services produced domestically;the GDP deflator reflects the prices of all goods and services bought by consumers.
• D)The CPI reflects a fixed basket of goods and services;the GDP deflator reflects current production of goods and services.

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Definitions:

Total Revenue

The aggregate income a company generates from its sales of products or delivery of services over a designated period.

Price Falls

A decrease in the market price of a good or service, which can affect consumer demand, producer supply, and overall market equilibrium.

Price Elasticity

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.