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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 11, Problem 1CQQ
Textbook Problem
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The CPI measures approximately the same economic phenomenon as

a. nominal GDP

b. real GDP

c. the GDP deflator

d. the unemployment rate.

To determine
Equivalent ofConsumer Price Index.

Answer to Problem 1CQQ

Option ‘c’ is the correct answer.

Explanation of Solution

Option (c)

CPI and GDP deflator both measures the overall level of prices in the economy. Thus, option ‘c’ is correct.

Option (a)

Nominal GDP measures the value of the economic output at current market prices. So option ‘a’ is incorrect.

Option (b)

Real GDP measures the value of the economic output adjusted for price changes.  Hence option ‘b’ is incorrect.

Option (d)

Unemployment rate measures the level of unemployment in the economy. So, option‘d’ is incorrect.

Economics Concept Introduction

Concept Introduction:

Consumer Price index (CPI): It is a measure that examines the changes in price levels of a basket of consumer goods and services for the present time from base year.

Inflation rate: Inflation rate refers to the rate of change in the price level.

GDP deflator: Gross Domestic Product (GDP) deflator is the measure of inflation.

Real GDP: Real GDP refers to the market value of all final goods and services produced in an economy during an accounting year, and measured in constant prices.

Nominal GDP: Nominal GDP refers to the market value of all final goods and services produced in an economy during an accounting year, measured in current prices.

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