Which of the following statements is correct?a.The CPI can be used to compare dollar figures from different points in time.b.The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate.c.Compared to the consumer price index (CPI), the GDP deflator is the more common gauge of inflation.d.The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

Question
Asked Oct 24, 2019
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Which of the following statements is correct?

a.

The CPI can be used to compare dollar figures from different points in time.

b.

The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate.

c.

Compared to the consumer price index (CPI), the GDP deflator is the more common gauge of inflation.

d.

The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

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Expert Answer

Step 1

The CPI is an effective tool and is used in the procedure of how it could help compare it with the different dollars and estimated figures from different points in time. So it is the correct option.

Step 2

It is true how the inflation rate can be defined in terms of calculating the percentage change that could consider the price index (includes the CPI or the GDP deflator). The first part of the state is true, as the inflation rate tells us the percentage through which it would be helpful in terms of the price level that could be changing with the period to period. But the second part of the statement is not correct as the deflator can adequately measure how the changes in prices concerning the goods and services can be produced in an economy.

Step 3

The statement is not correct. The CPI is defined as an easier measure to calculate, in comparison to the GDP deflator, however, the CPI can be used for the measures a better measurement...

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