If the prices of Australian-made shoes imported into Canada increase, what happens to the GDP deflator and the consumer price index?

Question

Quizplus · Accepted Answer

The consumer price index (CPI) measures the change in prices of goods and services bought by consumers, meaning if the prices of Australian-made shoes increase, the CPI will increase as well. However, the GDP deflator measures the overall price levels of all goods and services produced domestically, meaning the import of Australian-made shoes does not affect the GDP deflator. Therefore, only the consumer price index will increase.

If the Prices of Australian-Made Shoes Imported into Canada Increase