Asked by Mckenna Jakunskas on Apr 28, 2024
Verified
Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.
Consumer Price Index
An index of the variation in prices paid by typical consumers for retail goods and other items.
GDP Deflator
A measure of the price level of all domestically produced goods and services in an economy, used to adjust nominal GDP to real GDP.
Gauge Of Inflation
A measure that reflects how much and how quickly prices for goods and services rise over a period, indicating the rate of inflation.
- Organize the diverse methodologies and benchmarks for evaluating inflation.
- Contrast the use of the CPI and the GDP deflator as metrics for measuring inflation.
Verified Answer
RV
Rakesh VinodMay 01, 2024
Final Answer :
True
Explanation :
The Consumer Price Index (CPI) specifically measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, making it a more direct measure of the inflation experienced by consumers compared to the GDP deflator, which reflects prices for all domestically produced goods and services. Therefore, CPI is more commonly used as a gauge of inflation from the consumer perspective.
Learning Objectives
- Organize the diverse methodologies and benchmarks for evaluating inflation.
- Contrast the use of the CPI and the GDP deflator as metrics for measuring inflation.