Question

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because a. the CPI is calculated more often than the GDP deflator is. b. the CPI better reflects the goods and services bought by consumers. c. the GDP deflator cannot be used to gauge inflation. d. the CPI is easier to measure.

Answer 1

Answer:

b. the CPI better reflects the goods and services bought by consumers.

Explanation:

The Consumer Price Index (CPI) measures the change in price over a period of time (inflation) of a selected basket of goods and services that represents those goods and services that are most often bought and consumed by the average consumers.

While the GDP Deflator includes the change in price of all goods and services, even those that are not commonly purchased, CPI only includes those that are common, for example: food, gas, housing, and medical insurance. Because of this, the CPI is a better gauge of inflation, and is the index that is usually used to measure inflation.