The price of imported olives produced by a U.S.company operating in Spain increases.By itself,what effect will this price increase have on the GDP deflator and on the CPI?

Question

Quizplus · Accepted Answer

The GDP deflator measures the overall price level of all goods and services produced domestically, while the CPI measures the overall price level of goods and services purchased by consumers. Since the imported olives are produced by a U.S. company operating in Spain, its price increase does not affect the domestic production of goods and services, and therefore does not affect the GDP deflator. However, since the olives are purchased by consumers, their price increase will be reflected in the CPI. Thus, the GDP deflator will be unaffected and the CPI will increase.

The Price of Imported Olives Produced by a U