Explain the difference between the GDP deflator and the Consumer Price Index
What will be an ideal response?
There are three key differences between the two baskets:
1. The GDP basket includes things that households do not purchase, like coal fired power plants, locomotives, subway stations, city buses, aircraft carriers, and nuclear submarines. Consumers may use services provided by governments and firms that purchase these items, but no consumer purchases them directly, so they appear in the GDP basket but not in the consumer basket.
2. The consumer basket includes things that households purchase but are not counted in GDP. For example, GDP only counts domestic production, so it does not count electronics products manufactured abroad.
3. Even if a product is included in both the GDP basket and the consumer basket, it is likely to have a different weight in the two baskets. For example, housing-related expenditures are in both the GDP basket and the consumer basket, but housing has a larger role in the consumer basket.
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A. are, are B. are, are not C. are not, are D. are not, are not
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A) an increase in the expected future exchange rate. B) a decrease in the U.S. interest rate differential. C) a decrease in the exchange rate. D) an increase in the exchange rate. E) an increase in the U.S. interest rate differential.