Question

A decrease in the price of domestically produced industrial robots will be reflected in a. both the GDP deflator and the consumer price index b. neither the GDP deflator nor the consumer price index c. the GDP deflator but not in the consumer price index d. the consumer price index but not in the GDP deflator

Answer 1

Answer:

The correct answer is option c.

Explanation:

A consumer price index measures the change in the price level of weighted average of a basket of goods and services purchased by the consumers.  

GDP deflator measures the change in the price of all domestically produced goods and services.  

A change in the price of domestically produced industrial robots will be included in the GDP deflator as it includes the prices of all domestically produced goods and services.  

But it will not be included in the CPI as the industrial robots are not purchased by consumers in households, they are not consumer goods.