The GDP Deflator Differs from the CPI in Its Measurement

question 11

Multiple Choice

The GDP deflator differs from the CPI in its measurement of inflation in that:

• A)it measures the price changes of all goods,not just those in a typical consumer's basket.
• B)it uses the total quantities that are produced,not the ratio of what a typical consumer might consume.
• C)it does not include imports,which may have a real effect on the typical consumer's cost of living.
• D)All of these statements are true.

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Definitions:

Subjective Estimates

Judgments or opinions used in decision-making or accounting that are based on personal feelings or beliefs rather than on precise measurement.

Financial Accounting

The field of accounting that focuses on the summary, analysis, and reporting of financial transactions pertaining to a business to external users.

Managerial Accounting

The area of accounting focused on providing financial data and advice to company managers for decision-making purposes.

GAAP

Generally Accepted Accounting Principles encompass a series of standard accounting practices and rules for the creation of financial reports.