Answer to Question #309000 in Microeconomics for Kinza Tariq

Question

5. Three price indices were considered in this chapter: the GDP deflator, the CPI, and the PPL Explain the differences among these different measures of the price level.

Answer 1

GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year.

CPI is the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time.

Producer Price Index (PPI) is a price index that measures the average changes in prices received by domestic producers for their output.