Question

Question 1: True, False or uncertain

Explain whether each of the following statement is true, false or uncertain. Start your answer by selecting one of the three statements – “True”, “False” and “Uncertain” and then provide arguments to justify your selection (be brief and concise in less than 100 words). You need to make assumption clear, reasonable and explicit if making any. The quality and logic of arguments determine your marks. (4 marks each)

1. The price of cars produced in Australia sold to consumers in the United States (US) goes up. This means that GDP deflator and the CPI rise in the US.

Answer 1

this statement is TRUE

Explanation:- because the consumers are always looking for goods which have lower prices. Cost price index measures an extent of inflation. Whereas GDP deflator also measures differences between nominal and real GDP levels. Consumers of United States are purchasing cars from Australia which means that consumers are getting the cars produced in Australia as cheaper as possible. here because of increase in prices of cars in United States produced by Australia so here it should be concluded that United states is undertaking inflation. It implied rising of GDP deflator. so the cost of price index also increase.