CPI and GDP Deflator Concepts

What does the Consumer Price Index (CPI) measure?

• The total value of all goods and services produced domestically.

• The overall cost of goods and services bought by a typical consumer.

• The ratio of nominal GDP to real GDP.

• The prices of goods and services produced for export.

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What is the GDP deflator?

• A measure of the total income earned by households.

• The overall cost of goods and services bought by a typical consumer.

• The ratio of nominal GDP to real GDP, reflecting current prices relative to base year prices.

• A measure of the unemployment rate.

What common economic indicator can both the CPI and GDP deflator be used to measure?

• Economic growth

• Unemployment rate

• Inflation rate

• National debt

How do imported goods factor into the CPI and GDP deflator?

• Imported goods are included in both CPI and GDP deflator.

• Imported goods are excluded from both CPI and GDP deflator.

• Imported goods are included in CPI but excluded from GDP deflator.

• Imported goods are excluded from CPI but included in GDP deflator.

What is a key difference in how the CPI and GDP deflator handle the basket of goods?

• CPI uses a changing basket, while GDP deflator uses a fixed basket.

• CPI uses a fixed basket (modified periodically), while GDP deflator uses changing baskets.

• Both CPI and GDP deflator use a fixed basket of goods.

• Both CPI and GDP deflator use changing baskets of goods.