If the price of used automobiles increased dramatically relative to all other prices,and the demand for all goods remained the same,which of the following would most likely occur?
A) The GDP price index would decrease less than the CPI.
B) Both the GDP price index and the CPI would decrease.
C) The GDP price index would increase more than the CPI.
D) The CPI would increase more than the GDP price index.
E) Both the GDP price index and the CPI would increase by the same amount.

Question

Quizplus · Accepted Answer

The CPI measures the overall cost of a basket of goods and services consumed by households, while the GDP price index measures the overall cost of all goods and services produced in the economy. Therefore, if the price of used automobiles increased dramatically relative to all other prices, it would have a greater impact on the CPI than the GDP price index. As a result, the CPI would increase more than the GDP price index. Therefore, D is the best choice.

If the Price of Used Automobiles Increased Dramatically Relative to All