Which of the following is true about the consumer price index (CPI)and the GDP price index?
A)Both measures weigh prices by the quantities consumed in some base year.
B)Both yield identical numbers for price level changes for any two years.
C)A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods.
D)The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level.
E)A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply.

Question

Quizplus · Accepted Answer

The GDP price index accounts for changes in consumption patterns, including substitution effects, which can lead to smaller measured price level changes compared to the CPI.

Which of the Following Is True About the Consumer Price