Trends over the last 70 years for the consumer price index (CPI), producer price index (PPI), and gross domestic product (GDP) deflator show that:
A) They exhibit identical patterns.
B) They have changed in similar but not identical patterns.
C) The GDP deflator has shown considerably higher inflation than the other two measures.
D) The producer price index has shown considerably higher inflation than the other two measures.

Question

Quizplus · Accepted Answer

The CPI, PPI, and GDP deflator have all shown trends of inflation over the last 70 years, but their patterns are not identical due to differences in what they measure and how they are calculated. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The PPI measures the average change over time in the selling prices received by domestic producers for their output. The GDP deflator measures the change in prices of all new, domestically produced, final goods and services in an economy. Each index has its own scope and methodology, leading to similar but distinct patterns of change.

Trends Over the Last 70 Years for the Consumer Price