The GDP deflator is a broader measure of the price level than the CPI because
A) it covers sales tax.
B) it covers rents.
C) it covers investment.
D) it factors out fluctuations in seasonal items.

Question

Quizplus · Accepted Answer

The GDP deflator measures the overall price level of goods and services included in GDP, which includes consumer goods and services, investment goods, government purchases, and exports, whereas the CPI only includes consumer goods and services. Therefore, choice C is correct. Choices A and B are incorrect because the CPI also includes sales tax and rents, respectively. Choice D is incorrect because while the CPI does not factor out seasonal items, it is the GDP deflator that does.

The GDP Deflator Is a Broader Measure of the Price