Scribd
Upload
658 views1 page

MGT411 MBF GDB Solution CPI Vs GDP Deflator

The GDP deflator measures inflation using a basket of domestic goods that can change over time, while the CPI uses a fixed basket of consumer goods including imports. The GDP deflator is calculated quarterly allowing weights to change, whereas CPI revisions are less frequent. Although they provide similar measures of inflation over the long run, in the short term the GDP deflator and CPI can diverge as they use different baskets and updating schedules.

Uploaded by

Rana Umair A Khan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
658 views1 page

MGT411 MBF GDB Solution CPI Vs GDP Deflator

The GDP deflator measures inflation using a basket of domestic goods that can change over time, while the CPI uses a fixed basket of consumer goods including imports. The GDP deflator is calculated quarterly allowing weights to change, whereas CPI revisions are less frequent. Although they provide similar measures of inflation over the long run, in the short term the GDP deflator and CPI can diverge as they use different baskets and updating schedules.

Uploaded by

Rana Umair A Khan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 1

CPI vs GDP Deflator

GDP Deflator takes into account goods that are produced domestically. The GDP deflator
is calculated quarterly and it weights may change per calculation.

If expressed mathematically,

GDP Deflator = (Nominal GDP/Real GDP) x 100

Essentially, the GDP deflator compares the price level in the current year to level in the
base year.

CPI, which is short for Consumer Price Index, indicates the prices of a representative
basket of commodities procured by the consumers. It uses a fixed basket of goods and
services and is a widely used measure of the cost of living faced by consumers of a
nation. Like the GDP deflator, it also compares prices of the current period to a base
period.

CPI tends to consider insignificant goods, even the outdated ones that are not really
purchased by the consumers anymore. Nevertheless, they are still considered for pricing
in the fixed basket. Consumption goods are the main priority of the CPI measure.

As you can see, GDP deflator is not identical with the CPI but provides an alternative to
each other as a measure of inflation. Over long periods of time, both provide similar
numbers, but they can diverge in shorter periods.

Summary:

1. The GDP deflator measures a changing basket of commodities while CPI


always indicates the price of a fixed representative basket.
2. GDP deflator frequently changes weights while CPI is revised very
infrequently.
3. CPI will consider imported goods because they are still considered as consumer
goods while GDP deflator will only contain prices of domestic goods.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy