Posted: February 9th, 2017

How do the CPI and the GDP deflator differ? Why do economists believe that the CPI overstates the rate of inflation?

1)How do the CPI and the GDP deflator differ? Why do economists believe that the CPI overstates the rate of inflation? Is this an important propblem? (Please be very descriptive).
2)What is the connection between an increase in government purchases and the trade deficit? (Explain how the former affects the latter.) If possible be very detailed.