Which of the Following Statements Is Correct

question 143

Multiple Choice

Which of the following statements is correct?

• A)The consumer price index is a measure of the overall level of prices,whereas the GDP deflator is not a measure of the overall level of prices.
• B)If,in the year 2011,the consumer price index has a value of 123.50,then the inflation rate for 2011 must be 23.50 percent.
• C)Compared to the GDP deflator,the consumer price index is the more common gauge of inflation.
• D)The consumer price index and the GDP deflator reflect the goods and services bought by consumers equally well.

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Definitions:

GDP

Gross Domestic Product, the total value of all goods and services produced within a country's borders in a specific time period, used as a broad measure of economic activity.

Net Domestic Product

The total value of all goods and services produced within a country's borders adjusted for depreciation.

Depreciation

The process of allocating the cost of a tangible or physical asset over its useful life, reflecting wear, tear, and obsolescence.

GDP Deflator

The GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy, acting as a gauge of inflation.