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Question 1

What is the Consumer Price Index (CPI)?

Answer 1

Measures the average price of a fixed basket of goods and services purchased by households over time.

Includes imported goods (e.g., foreign cars, electronics), tracks cost of living for consumers, and is based on a fixed basket of goods. It indicates inflation affecting consumers.

Question 2

What is the GDP Deflator?

Answer 2

Measures the average price of all domestically produced goods and services in the economy.

Excludes imported goods, reflects changing baskets based on GDP composition, and includes capital goods (e.g., machinery). It measures overall inflation in the economy.