The Bank of Canada uses the rate of change in the CPI rather than the GDP deflator to measure inflation because
A)the GDP deflator is more prone to biases and error than the CPI.
B)the CPI is a more accurate reflection of the inflation faced by households than the GDP deflator.
C)the GDP deflator lacks the information on inflation in the price of industrial equipment and other goods not found in the CPI.
D)the CPI includes the prices of goods but not services.
E)the CPI is easier to calculate than the GDP deflator.

Question

Quizplus · Accepted Answer

The CPI is a better reflection of the inflation faced by households, whereas the GDP deflator includes the prices of both goods and services and is therefore less accurate for measuring inflation as experienced by households.

The Bank of Canada Uses the Rate of Change in the CPI