In each of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and justify your answer (in detial). The price of imported capital goods used in the production of sugar has increased.The price of Tapal tea has increased.Answer from your experts are attached but i am confused. (two diffrent statement), first statement is mentioned below and others screenshot is attached.The rise in the price of capital goods affects only the CPI of the country as this may cause a change in the price of sugar domestically. The GDP deflator does not include this as it only includes domestic production.The increase in the price of tea causes a change in both GDP deflator and CPI. As it's produced domestically, it causes a change in the GDP deflator. Tea is a part of the basket of goods used to measure CPI and hence it causes a change here too.................for capital goods i found two diffrent answer from your expert. i am confused one says both cpi and gdp deflator will affected other says only cpi will be affected. Expert AnswerStep 11.The price of imported capital goods used in the production of sugar has increasedBecause here price level hss increased,therefore we can say that CPI and GDP deflator,bothwould be affected.GDP deflator depends on chare in price level.Because import price of capital goods is more,price of sugar will also increase.Step 22.The price of Tapal tea has increasedHere there is change in price level,therefore both CPI and GDP deflator will increase.

CPI measures changes in the price level of a weighted average market basket of goods that consumers…

Answered: In each of the following cases, does…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In each of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and justify your answer (in detial).

The price of imported capital goods used in the production of sugar has increased.
The price of Tapal tea has increased.

Answer from your experts are attached but i am confused. (two diffrent statement), first statement is mentioned below and others screenshot is attached.

The rise in the price of capital goods affects only the CPI of the country as this may cause a change in the price of sugar domestically. The GDP deflator does not include this as it only includes domestic production.
The increase in the price of tea causes a change in both GDP deflator and CPI. As it's produced domestically, it causes a change in the GDP deflator. Tea is a part of the basket of goods used to measure CPI and hence it causes a change here too.

................

for capital goods i found two diffrent answer from your expert. i am confused
one says both cpi and gdp deflator will affected
other says only cpi will be affected.

Expert Answer
Step 1
1.The price of imported capital goods used in the production of sugar has increased
Because here price level hss increased,therefore we can say that CPI and GDP deflator,both
would be affected.
GDP deflator depends on char
e in price level.
Because import price of capital goods is more,price of sugar will also increase.
Step 2
2.The price of Tapal tea has increased
Here there is change in price level,therefore both CPI and GDP deflator will increase.

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