Question

The consumer price index (CPI) differs from the GDP deflator since it includes goods and services ............. rather than goods and services ...............

• A. exported, imported
• B. consumed, produced
• C. exported, consumed
• D. consumed, imported

Hint:

CPI focuses on the prices consumers pay, while the GDP deflator tracks the prices of domestically produced goods.

Answer 1

The Correct Option is B

Step 1: Understand CPI and GDP Deflator.
The Consumer Price Index (CPI) measures the average change in prices paid by consumers for a fixed basket of goods and services, including items that are consumed domestically, regardless of whether they are produced locally or imported.
The GDP deflator, on the other hand, is a measure of the price level of all domestically produced goods and services in an economy. It includes only the goods and services that are produced within the country, excluding imported goods.
Step 2: Compare the two indices.
The CPI includes goods and services that are consumed, regardless of where they are produced, while the GDP deflator includes only goods and services that are produced domestically.
Thus, the correct answer is that the CPI includes goods and services consumed, while the GDP deflator includes goods and services produced.
Final Answer: \[ \boxed{\text{consumed, produced}} \]