Which of the following statements is true concerning the GDP deflator and the CPI as measures of inflation?

Question

Quizplus · Accepted Answer

The CPI and the GDP deflator generally show similar movements in inflation, with some differences due to the items included in each index and the weights assigned to them. Option A is incorrect, because both indices capture the rise in inflation in the 1960s and 1970s, although the CPI may have shown it more clearly due to the inclusion of housing costs. Option B is incorrect, because the GDP deflator measures inflation across all sectors of the economy, whereas the CPI focuses only on consumer goods and services, and thus may be more volatile. Option C is incorrect, because the CPI also shows the rise in inflation in the 1960s and 1970s. Option E is incorrect, because both indices show the decline in inflation in the 1980s and early 1990s.

Which of the Following Statements Is True Concerning the GDP