Which of the following would probably cause the CPI to rise more than the GDP deflator in the Pakistan ?
Correct answer: A. An increase in the price of BMWs produced in Germany and sold in the Pakistan
- A. An increase in the price of BMWs produced in Germany and sold in the Pakistan
- B. An increase in the price of Peugeots produced in the Pakistan
- C. An increase in the price of helicopters purchased by the Pak Navy.
- D. An increased in the Price of domestically produced armoured vehicles sold exclusively to Iran
Explanation
Imported BMWs bought by consumers enter Pakistan’s CPI basket, but imports are excluded from GDP and therefore from the GDP deflator. A price rise in them raises the CPI without directly raising the GDP deflator.
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