Question

1. How is inflation measured? Fill in the blanks to complete the passage about the CPI and the GDP deflator. The Consumer Price Index (CPI) and the GDP deflator are both price indices, so they both serve as measures of inflation. However, the CPI uses a smaller basket of goods. The GDP deflator aims to take into account all final goods and services, whereas the CPI only includes goods and services sold to –. So, for instance, prices on farm equipment are included in the – but not in the –.

Answer 1

Answer:

First blank: Consumers

Second blank: GDP

Third blank: CPI

Explanation:

The Consumer Price Index is used to measure the basic basket of services and goods that a normal person often buys in order to have a decent quality of life, the GDP includes all goods and services produced, for example all the office equipment, or farm equipment that was produced by a countries economy, the average customer doesn´t need farm equipment nor office equipment that is why it is not taken into account in the Costumer Price Index.