6. Let's look at multiple statistics which are used to measure inflation: (a) Why, in the...

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6. Let's look at multiple statistics which are used to measure inflation: (a) Why, in the opinion of many economists, does the US government measure both a GDP deflator and a CPI? Historically and em- pirically, how have the two been related since the early 1970's? Clarification, if there are any significant differences between the two measures in the data, I am asking you to describe those dif- ferences. I am not restricting what differences you may choose to report. You will want to graph both on the same graph to observe these differences. You many also want to graph growth rates of the data as well. If one of the two measures shows more "inflation" on a consistent basis, give two reasons besides the limitation of the CPI to consumer goods, why this is the case. (b) Why do the trends for data on the prices of consumption expen- ditures differ from the CPI and the GDP deflator? 6. Let's look at multiple statistics which are used to measure inflation: (a) Why, in the opinion of many economists, does the US government measure both a GDP deflator and a CPI? Historically and em- pirically, how have the two been related since the early 1970's? Clarification, if there are any significant differences between the two measures in the data, I am asking you to describe those dif- ferences. I am not restricting what differences you may choose to report. You will want to graph both on the same graph to observe these differences. You many also want to graph growth rates of the data as well. If one of the two measures shows more "inflation" on a consistent basis, give two reasons besides the limitation of the CPI to consumer goods, why this is the case. (b) Why do the trends for data on the prices of consumption expen- ditures differ from the CPI and the GDP deflator?

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A The US government measures both a GDP deflator and a CPI in order to provide an accurate picture o... View the full answer