The CPI differs from the GDP deflator in that

A) the CPI is a price index, while the GDP deflator is an inflation index.
B) substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C) increases in the prices of foreign produced goods that are sold to U.S.consumers show up in the CPI but not in the GDP deflator.
D) increases in the prices of domestically produced goods that are sold to the U.S.government show up in the CPI but not in the GDP deflator.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, changing over time.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy, indicating how much of the change in the gross domestic product can be attributed to changes in the price level.

Substitution Bias

A phenomenon where consumers alter their consumption preferences in response to relative price changes, potentially misrepresenting inflation measurements.