QUESTION 33 2 pointsSave Answer The CPI differs from the GDP deflator in that O

Question

QUESTION 33 2 pointsSave Answer The CPI differs from the GDP deflator in that O A. substitution bias is not a problem with the CPl, but it is a problem with the GDP deflator. OB. increases in the prices of domestically produced goods that are sold to the UAE government show up in the CPI but not in the GDP deflator. Oc the CPl is a price index, while the GDP deflator is an inflation index OD. increases in the prices of foreign produced goods that are sold to UAE consumers show up in the CPI but not in the GDP deflator.

Explanation / Answer

Answer - increases the prices of foreign produced goods that are sold to the UAE consumers shows up in CPI but not in GDP deflator.

Reason - The GDP deflator measures the price level of all goods and services that are produced within the economy. While the Consumer Price Index measures the price level of all goods and services that are bought by the consumers within the economy or foreign goods that are sold to the UAE consumers. That means, the GDP deflator does not include changes in the price of imported goods, while the CPI include that. so, the price of foreign produced goods shows up in CPI but not in GDP deflator.

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