Suppose that increases in the prices of Canadian medical care cause the CPI to increase by 2 percent, while all other prices remain the same. By how much will the GDP deflator increase?

Question

Quizplus · Accepted Answer

The GDP deflator measures the prices of all domestically produced goods and services, while the CPI measures the prices of a basket of goods and services purchased by consumers. If only medical care prices increase, the GDP deflator will likely increase by less than 2 percent because it includes a broader range of goods and services, not just consumer goods.

Suppose That Increases in the Prices of Canadian Medical Care