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 CPI for this year is calculated by dividing thecost of a given market basket of goods and services using this year’s prices by thevalue of all goods and services produced in the economy this year using the base year’s prices and multiplying by 100. However, the GDP deflator reflects only the prices of all goods and services produced domestically. Indicate whether each scenario will affect the GDP deflator or the CPI for the United States. Check all that apply.
a. A decrease in the price of a Waterman Industries deep-water reel, which is a commercial fishing product used for deep-sea fishing
b. An increase in the price of a Japanese-made television that is popular among U. S. consumers
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