Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 24 - Part VIII - Measuring the Cost of Living - Questions for Review - Page 519: 3

Answer

Consumer price index will be more affected than GDP deflator.

Work Step by Step

The fixed basket of goods which is used to compute CPI includes both domestic and imported goods. In contrast, GDP deflator is a measure of only domestically produced goods. Therefore, increases in the price of imported wine will affect CPI more.
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