Question

Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator.

the gdp deflator for this year is calculated by dividing the _____(cost of a given market basket of goods and services/value of all goods and services produced in the economy this year/value of all goods and services produced in the economy in the base year) using ____ (this year's prices/base year prices) by the ____ (cost of a given market basket of goods and services/value of all goods and services produced in the economy in the base year/ value of all goods and services produced in the economy this year) _____ using _____ (the base year prices/this year prices) ____and multiplying by 100.
however, the cpi reflects only the prices of all goods and services (produced domestically/bought by consumers) ____ .

Answer 1

The GDP deflator and the Consumer Price Index (CPI) are commonly used price indexes to measure inflation. The GDP deflator measures the overall change in prices of all goods and services produced in the economy, while the CPI reflects the prices of goods and services bought by consumers.

Step-by-step explanation:

The two most commonly used price indexes to measure inflation are the Consumer Price Index (CPI) and the GDP deflator. The GDP deflator is calculated by dividing the value of all goods and services produced in the economy this year by the value of all goods and services produced in the economy in the base year, using this year's prices and multiplying by 100. On the other hand, the CPI reflects only the prices of all goods and services bought by consumers.

The GDP deflator is calculated using the value of all goods and services produced in the economy this year at this year's prices, divided by the value of all goods and services produced in the base year at base year prices, and multiplied by 100. The CPI, which measures household consumer prices, may be a more accurate measure of cost of living for households.

The GDP deflator for this year is calculated by dividing the value of all goods and services produced in the economy this year using this year's prices, by the value of all goods and services produced in the economy in the base year using the base year prices, and multiplying by 100. However, the Consumer Price Index (CPI) reflects only the prices of all goods and services bought by consumers.

When seeking the best measure of inflation, the GDP deflator is often used as it includes prices for all goods and services produced, making it a broad measure. However, it might not accurately reflect the cost of living since it includes items not commonly purchased by households, such as heavy machinery and office buildings. On the other hand, CPI, which is also known as the cost-of-living index, is focused on the household consumer market and measures the price changes of a basket of goods and services typically purchased by households.