The Consumer Price Index and the GDP Deflator Are Two

question 121

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 two measures are constructed differently,but they always indicate the same inflation rate.
• B)The substitution bias applies equally to both measures.
• C)A change in the price of Korean televisions is reflected in the U.S.consumer price index but not in the U.S.GDP deflator.
• D)All of the above are correct.

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Definitions:

Binding Price Floors

Binding price floors are minimum prices set by the government for certain goods or services that are above the equilibrium price, leading to surpluses.

Sellers

Persons or organizations that provide products or services to buyers or other commercial entities.

Labor Market

The market in which individuals offer their labor to employers in exchange for wages, salaries, or other forms of compensation.

Labor Supply

The complete count of hours that individuals in the workforce are willing to contribute and can work, at a determined rate of remuneration.