Answer to Question #180544 in Macroeconomics for touheed kiani

Question

write down the formula to compute growth rate in consumer price index. how the cpi differ from GDP deflator?

Answer 1

Let

Consumer price index be = CPI

 cost of market basket in a given year be  = Y

cost of market basket at base year be = X

Hence the formula ;

$CPI = \frac{Y}{X}×100$

The first is that GDP Deflator includes only domestic goods and not anything that is imported.

The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.