Which of the following would probably cause the CPI to rise more than the GDP deflator in the UK? An increase in the price of:
A) BMWs produced in Germany and sold in the UK.
B) Peugeots produced in the UK.
C) Helicopters purchased by the Royal Navy.
D) Domestically produced armoured vehicles sold exclusively to India.

Question

Quizplus · Accepted Answer

The CPI measures the prices of a basket of goods and services purchased by consumers, including imported goods like BMWs produced in Germany. The GDP deflator, on the other hand, only measures the average price level of all goods and services produced domestically, including Peugeots produced in the UK and domestically produced armoured vehicles sold exclusively to India. The price of helicopters purchased by the Royal Navy is also unlikely to have a significant impact on either measure.

Which of the Following Would Probably Cause the CPI to Rise