Homework Help: Economics

Posted by Joey on Saturday, September 30, 2006 at 9:40pm.

Why is it that the people responsible for pensions use the CPI as an indicator for inflation rather than the GDP deflator? Why is the CPI better?

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I believe the biggest reason is the base for each measures. CPI measures the weighted average change in prices for a market basket of consumer goods + services. The GDP deflator measures changes in prices of all goods+services included in GDP including investment and government spending.

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