AP Macroeconomics Question 252: Answer and Explanation

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Question: 252

7. An increase in the price of forklifts imported into the United States from Belgium will

  • A. increase the consumer price index and the GDP deflator.
  • B. increase the consumer price index but not the GDP deflator.
  • C. increase the GDP deflator but not the consumer price index.
  • D. increase the GDP deflator and the producer price index.
  • E. have no effect on the consumer price index or the GDP deflator.

Correct Answer: E


(E) The consumer price index will not be affected by the increase in the price of the forklifts because forklifts are an industrial product, not a consumer product. The GDP deflator is not affected because import prices are ignored by the deflator.