Question

An increase in the price of bread produced domestically will be reflected in:

Answer 1

The increase will reflect in the GDP deflator and the Consumer price index.

The GDP Deflator is used to measure the level of prices of all new and domestically produced goods and services in an economy.

• So, when there is an increase in price, the nominal GDP (Increased), so the GDP deflator Increased as well.

.

Consumer Price index is used to measure the inflated price of goods and services which are faced by all consumer households.

• So, when there is an increase in price, there is change in CPI .

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