The CPI Differs from the GDP Deflator in That

question 60

Multiple Choice

The CPI differs from the GDP deflator in that

• A)the CPI is a price index, while the GDP deflator is an inflation index.
• B)substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
• C)increases in the prices of foreign produced goods that are sold to U.S.consumers show up in the CPI but not in the GDP deflator.
• D)increases in the prices of domestically produced goods that are sold to the U.S.government show up in the CPI but not in the GDP deflator.

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Definitions:

Direct Materials Cost

The expense incurred for materials that are an integral part of a finished product, which can be directly attributed to the product itself.

Activity-Based Costing

A costing methodology that assigns costs to products or services based on the resources they consume, aiming to provide more accurate cost information.

Overhead Cost

Expenses related to the operation of a business that are not directly tied to a specific product or service, such as rent and utilities.

Activity Cost Pools

Groupings of individual costs associated with specific activities used in activity-based costing to allocate costs more accurately.