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What is a major result of imported consumer goods not being directly included in the GDP deflator?

Answer and explanation

Correct answer: Import price rises may affect CPI differently from the deflator

The GDP deflator measures prices of final goods and services produced domestically, whereas the Consumer Price Index may include goods purchased by households even when they are imported. Consequently, a rise in import prices can raise CPI without directly raising the GDP deflator by the same amount. Therefore option A is correct; the other choices incorrectly claim that the deflator is zero, imports are domestic output, or nominal GDP is unmeasurable.

Related tags

Gdp DeflatorCpiImportsDomestic ProductionGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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