Explain the difference between the GDP deflator and the Consumer Price Index

What will be an ideal response?


There are three key differences between the two baskets:
1. The GDP basket includes things that households do not purchase, like coal fired power plants, locomotives, subway stations, city buses, aircraft carriers, and nuclear submarines. Consumers may use services provided by governments and firms that purchase these items, but no consumer purchases them directly, so they appear in the GDP basket but not in the consumer basket.
2. The consumer basket includes things that households purchase but are not counted in GDP. For example, GDP only counts domestic production, so it does not count electronics products manufactured abroad.
3. Even if a product is included in both the GDP basket and the consumer basket, it is likely to have a different weight in the two baskets. For example, housing-related expenditures are in both the GDP basket and the consumer basket, but housing has a larger role in the consumer basket.

Economics

You might also like to view...

An economy may be operating at a point inside the production possibilities curve if: a. technological progress enables the economy to produce quantities of output otherwise unattainable. b. a substantial amount of labor is unemployed

c. a substantial amount of machinery is idle. d. either b. or c. occur.

Economics

Over the past 80 years, real GDP has

a. decreased in more years than it has increased b. increased dramatically c. increased slowly d. increased moderately e. been stable

Economics

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane. DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane. DuPont won the case. What type of evidence constituted DuPont's defense?

Economics

Suppose an early freeze decreases the supply of oranges. The equilibrium quantity in this market will not change after the change in supply if the demand curve were: a. perfectly horizontal. b. perfectly vertical

c. downward sloping. d. upward sloping.

Economics