Compare GDP deflator with CPI. Which of the two is a better measure of determining price fluctuations in your opinion?

Md Ariful Islam

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Md Ariful Islam

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The GDP deflator measures the prices of all goods and services produced, whereas the CPI measures the prices of only the goods and services bought by consumers. The GDP deflator gives a different rate of inflation than the CPI because CPI is about consumption while GDP is about production. CPI also uses a fixed basket while GDP uses a basket of currently produced goods and services.

In my opinion Since GDP isn't based on a fixed basket of goods and services, the GDP price deflator has an advantage over the CPI.

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Problem No. 2 From following date compute (i) Real GDP (ii) GDP deflator (iii) inflation rate Year Nominal GDP Rs. billion CPI 2018-19 54195 228.1 2020-21 61583 251.3

(i) Real GDP in 2020-21 is:Yr = 61583×228.1/251.3 = 55897.66. (ii) GDP deflator is: Deflator = 61583/55897.66×100 = 110.17.(iii) Inflation rate is 110.17 - 100 = 10.17%.

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A country devaluates its currency causing inflation, which index will estimate inflation more in the short run between cpi and gdp deflator?

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nominal gdp when real gdp is 2,500 and gdp deflator is 140

Nominal GDP=real GDP*deflator/1002500*140/100=3500Nominal GDP=3500

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The CPI increases faster because it only accounts for particular consumer goods while the GDP accounts the cost of all goods and services

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An increase in the nominal GDP will result if the price of steel rises causing cost-push inflation.The CPI will also rise over a certain period of time since there is...

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CPI and GDP deflator are the commonly used price indices in measuring inflation. The rise in CPI and GDP deflator by 3% in the past six months is an indication...

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a) Does an increase in the price of imported Belgian chocolate affect the CPI or the GDP deflator more? Why

The main difference between CPI and GDP deflator is that the GDP deflator quantifies the costs, everything being equal, and administrations delivered, though the CPI or RPI measures the costs...

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