Homework Answers
Now part C:
There is no difference between the results in part A and B. It is because by definition, GDP deflator calculates the inflation by taking into account the basket of those goods which are being consuming by the people. The basket changes with change in consumption.
CPI measures the inflation by taking into consideration a fixed basket of good, which does not change with changing consumption of people.
In our question we had two goods: pizza and burger. Thus both of these goods formed the same basket for GDP deflator as well as CPI. There we got the same result of - 20%.
Hope your query is solved. Do give this answer a thumbs up. All the best.
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Hello can someone help me answer this plz? Part C confuses me
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