Which of the following is true?
A)The CPI and the GDP deflator tend to move in opposite directions.
B)The GDP deflator tends to be much more volatile than the CPI.
C)Both the CPI and the GDP deflator probably overstate the inflation rate.
D)The GDP deflator includes fewer goods than the CPI.
E)The GDP deflator generally rises substantially faster than the CPI during inflationary conditions.

Question

Quizplus · Accepted Answer

Both the Consumer Price Index (CPI) and the GDP deflator are measures of price levels and inflation, but they can overstate the inflation rate due to not fully accounting for improvements in the quality of goods and services over time. This phenomenon is known as quality bias.

Which of the Following Is True