Question

Alternative price indexes 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. by the and multiplying by 100. using using However, the CPI reflects only the prices of all goods and services Indicate whether each scenario will affect the GDP deflator or the CPI for the United States. Check all that apply.
a. Shows up in the... GDP Deflator CPI An increase in the price of a Japanese-made phone that is popular among U.S. consumers
b. A decrease in the price of a Treewood Equipment feller buncher, which is a commercial forestry machine made in the U.S. but not bought by U.S. consumers Grade it Now Save & Continue Continue without saving

Answer 1

Answer:

An increase in the price of a Japanese-made phone that is popular among U.S. consumers

This price increase would only show in the CPI because the GDP Deflator only accounts for goods produced domestically, while the CPI accounts for the most commonly bought goods and services, whether made domestically, or abroad.

A decrease in the price of a Treewood Equipment feller buncher, which is a commercial forestry machine made in the U.S. but not bought by U.S. consumers Grade it Now Save & Continue Continue without saving.

This price decrease would only be accounted for in the GDP Deflator, because the equipment is made within the U.S., and bought by an U.S. company.

It would not be included in the CPI because 1) it is not bought by consumers 2) it is not a good that is part of the most commonly bought basket of goods and services.