There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question in which you are interested. For each of the following situations, state whether the CPI or GDP deflator is a more appropriate measure to use and explain why the statistic is preferred.

a. You are interested in looking at the impact of higher prices of imported oil in the overall cost of living.
b. The government is interested in whether increases in defense spending are affecting the price level.
c. An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.

Question

There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question in which you are interested. For each of the following situations, state whether the CPI or GDP deflator is a more appropriate measure to use and explain why the statistic is preferred.

a. You are interested in looking at the impact of higher prices of imported oil in the overall cost of living.
b. The government is interested in whether increases in defense spending are affecting the price level.
c. An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.

Quizplus · Accepted Answer

The Answer of There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question in which you are interested. For each of the following situations, state whether the CPI or GDP deflator is a more appropriate measure to use and explain why the statistic is preferred.

a. You are interested in looking at the impact of higher prices of imported oil in the overall cost of living.
b. The government is interested in whether increases in defense spending are affecting the price level.
c. An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.

There Are a Number of Statistics Computed to Measure the Price