Question

The price of used cars and trucks in US has increased by 21% including a 10% increase in April alone, while the volume of used car transactions is keeping going up to a record high. Which of the following group of economic variables will go up as a result of a booming used car market?

A. CPI but not GDP deflator, PPI and real GDP
B. CPI and GDP deflator, but not real GDP and PPI
C. CPI, GDP deflator and, real GDP, but not PPI
D. CPI, GDP deflator, real GDP and PPI

Answer 1

C

Step-by-step explanation:

The consumer price index measures the changes in price of a basket of good. It is used to measure inflation. Because the price of price of used cars and trucks in US has increased , the CPI would increase

GDP deflator = (nominal GDP / real GDP) x 100

the volume of cars bought have increased, as a result, GDP deflator would increase