Final answer:
The CPI is more appropriate than the GDP deflator when analyzing government subsidies affecting consumer goods (option a) , as it reflects the direct impact on consumer expenses and the cost of living for households.
Step-by-step explanation:
When considering government policy situations, economic problems, or private sector situations, there are instances where using the Consumer Price Index (CPI) to convert from nominal to real values is preferred over the GDP deflator. A particularly apt situation for using the CPI is when analyzing government subsidies affecting consumer goods. Since the CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, it is more reflective of the direct impact on consumer expenses.
The CPI is considered a better measure in this case because it focuses on the retail prices of goods and services that consumers buy directly. For example, if the government decides to subsidize the cost of a staple food item, these subsidies would lower the price of that food item for consumers. The CPI would more accurately reflect the changes in the cost of living for consumers as a result of the policy because it specifically tracks the prices of consumer goods and services that households purchase, whereas the GDP deflator measures the prices of all goods and services produced domestically and might not show the direct impact on the consumer's cost of living in the same way.