Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 11 - Measuring the Cost of Living - Quick Check Multiple Choice - Page 231: 3

Answer

d) GDP deflator, not CPI

Work Step by Step

Rifles are not included among the 'household basket of goods' which is referenced when statisticians calculate CPI. Therefore, CPI does not change due to price hikes. However, GDP deflator measures changes in the price levels of all goods in the economy, meaning that the GDP deflator will change in response to the price hikes.
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