Question

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

(a)-The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods.
(b)-The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy.
(c)-The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy.
(d)-The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers.

Answer 1

(c)-The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy.

Step-by-step explanation:

The CPI measures the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Ad the GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year.