The correct option that affects the CPI but not the GDP deflator.

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Chapter 2, Problem 5QQ

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The correct option that affects the CPI but not the GDP deflator.

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The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia’s inflation rate in 2006? This question is stumping me. I thought that this answer was 124.4 but it seems that it is 24.4. I cant figure it out

What is the main reason why GDP deflator and CPI differ from each other? A) CPI includes investments, while GDP deflator doesn’t B) CPI includes durable goods, while GDP deflator doesn’t C) GDP deflator includes exports, but not imports D) CPI includes exports, but not imports

The table below shows some data I got from FRED on the CPI and PCE deflator. The PCE deflator is a price index similar to the GDP deflator but only uses the consumption ("personal consumption expenditures") part of the GDP data. Year CPI PCE deflator 1989 123.94 60.69 2001 177.04 79.74 2020 258.84 111.15 You were probably born around 2001 so calculate the annualized inflation rate based on the CPI between 2001 and 2020. Repeat to find the annualized inflation using the PCE deflator between 2001 and 2020. The gives a higher inflation rate O PCE, and its noticeably higher (over 0.5 percentage points) PCE, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points) CPI, and its noticeably higher (over 0.5 percentage points) CPI, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points)