EBK PRINCIPLES OF ECONOMICS
7th Edition
ISBN: 8220102958395
Author: Mankiw
Publisher: CENGAGE L
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Chapter 24, Problem 3QR
To determine
Effect on CPI and GDP deflator.
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Does an increase in the price of imported Frenchwine affect the CPI or the GDP deflator more? Why?
Does an increase in the price of imported Belgian chocolate affect the CPI or the GDP deflator more? Why
Suppose you are a senior public servant writing a bill to index Social
Security and pensions. That is your bill will adjust these benefits to
offset changes in the cost of living. Will you use the GDP deflator or
the CPI? Explain
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- Over a long period of time the CPI rose from 100 to 150. What does a CPI of 150 mean? If the price of imported vegetables rises, between the CPI and the GDP deflator, which one of the two will be affected more? Explain.arrow_forwardHow does the CPI compare the cost of the typical market basket of goods and services?arrow_forwardIf only cars and bikes are sold in a country and the consumer price index(CPI) has exceeded the GDP deflator what does this mean for the prices of the cars and the bike? they remain the same? Do they change differently? how does the GDP deflator supposed to move with CPI?arrow_forward
- In each scenario, determine the effects on the CPI and the GDP deflator. A local manufacturer raises the price of the industrial tractors it produces.arrow_forwardIn compiling data for the CPI, the Bureau of Labor Statistics makes no attempt to adjust the data to reflect quality changes.” True or false? Explain.arrow_forwardWhich do you think has a greater effect on the CPI:a 10 percent increase in the price of chicken or a10 percent increase in the price of caviar? Why?arrow_forward
- If A senior public is servant writing a bill to index Social Security and pensions so that the bill will adjust these benefits to offset changes in the cost of living. What will be used; the GDP deflator or the CPI? (short explanation)arrow_forwardWhat does the Consumer Price Index (CPI) measure? Be specific about what the categories of goods and services that the CPI tracks and measures.arrow_forwardDescribe the three problems that make the CPI animperfect measure of the cost of living.arrow_forward
- The CPI measures the price of all consumer goods. Is this true or false?arrow_forwardQUESTION 4 a. In each case of following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and Justify your answer. i. The price of imported Belgian chocolate has increased. ii. The price of imported equipment used in industrial level ice-cream production has increased. iii. The price of Millat Tractors has increased.arrow_forwardIn each case of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and Justify your answer. The price of imported Belgian chocolate has increased. The price of imported equipment used in industrial level ice-cream production has increased. The price of Millat Tractors has increased.arrow_forward
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