1). The Consumer Price Index (CPI) Which of the following does the consumer pric
ID: 1192319 • Letter: 1
Question
1). The Consumer Price Index (CPI)
Which of the following does the consumer price index (CPI) include?
U.S. exports,
Military equipment purchases by the government,
Household purchases of used cars,
2). For which of the following is the CPI not used?
Setting an inflation target,
Indexing payments,
Calculating real GDP from nominal GDP.
3).. Which of the following goods are included in the CPI but ignored by the GDP deflator?
U.S. cars purchased by foreigners,
Fruits produced in the United States and consumed by U.S. households,
Household purchases of used computers.
Explanation / Answer
(1) Option (c): Household purchase of used cars.
Exports are not a component of CPI, and CPI doesn't include defence purchases by government (Since i's a consumer price index).
(2) Option (c): Computing real GDP from nominal GDP.
Real GDP is derived by dividing Nominal GDP by a GDP deflator, not CPI.
(3) Option (c): Household purchase of used computer.
While CPI allows purchase of used goods, GDP deflator measures the ratio of nominal GDP and real GDP. Since GDP excludes any used goods from consideration, GDP deflator excludes purchase of used computers.
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