Question

If the price of Spanish olives imported into the United States decreases, then:


a.neither the GDP deflator nor the consumer price index will decrease.

b.the GDP deflator will decrease, but the consumer price index will not decrease.

c.both the GDP deflator and the consumer price index will decrease.

d.the consumer price index will decrease, but the GDP deflator will not decrease.

Answer 1

Answer:

d. the consumer price index will decrease, but the GDP deflator will not decrease.

Explanation:

If the price of Spanish olives imported into the United States decreases, then the consumer price index will decrease, but the Gross Domestic Products (GDP) deflator will not decrease.

The GDP price deflator also known as the implicit price deflator, measures the changes in the level of prices for all of the final goods and services produced domestically in an economy in a year.

The GDP deflator can be calculated by using the formula;

GDP deflator = (Nominal GDP/Real GDP) × 100.