There are a number of statistics computed to measure the price level of an economy, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question you are interested in. For each of the following situations, explain whether the CPI or the GDP deflator is a more appropriate measure to use and explain why the statistic is preferred. (a) The government is interested in whether increases in defense spending are affecting the price level. (50 words) (b) An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.
There are a number of statistics computed to measure the price level of an economy, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question you are interested in. For each of the following situations, explain whether the CPI or the GDP deflator is a more appropriate measure to use and explain why the statistic is preferred. (a) The government is interested in whether increases in defense spending are affecting the price level. (50 words) (b) An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.
Chapter6: Tracking The U.s. Economy
Section: Chapter Questions
Problem 4.8P
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There are a number of statistics computed to measure the price level of an economy, such as
the
many cases on the specific question you are interested in. For each of the following
situations, explain whether the CPI or the GDP deflator is a more appropriate measure to use
and explain why the statistic is preferred.
(a) The government is interested in whether increases in defense spending are affecting the
price level. (50 words)
(b) An economic consulting firm is investigating the impact on the aggregate price level of
more computers and electronic technology used in production.
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