Bureau of Economic Analysis data show that for the period 1929 through 2008 the

Question

Bureau of Economic Analysis data show that for the period 1929 through 2008 the average annual increase in the GDP price index is 3 0 percant The Bureau of Labor Statistics data show that for the period 1929 through 2008, the average annual increase in the CPl is 3 2 percent Although the difference of 02 percentage points is small, maintained over the 79 year period, the CPI rose by 17 percent more than the GDP price index How would you explain the difference in these two inflation measures? Choose the correct statement O A. The GDP price index uses the prices of all the goods and services in GDP O B. The CPI includes consumer goods and investment goods O c. The GDP price index weights each item using information from a past GDP Expenditure Survey O D. The CPI weights each item using information about current quantities. O E. There is a measurement error because both measures should give the same result

Explanation / Answer

Solution: The GDP price index uses the prices of all goods and services in GDP.

Explanation: The GDP price index uses the prices of all goods and services in GDP namely consumption, government purchases, investment, and exports. It is an average of the current prices of entire goods and services included in GDP as % of base year prices

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