Which scenario is most likely to cause the Consumer Price Index (CPI) in Pakistan to increase more than the GDP deflator?

Show Answers

A rise in the cost of BMW cars manufactured in Germany and imported into PakistanAn escalation in the price of Peugeots produced within PakistanAn increase in the price of helicopters bought by the Pakistan NavyA hike in the price of locally made armored vehicles sold solely to IranA surge in the price of agricultural products grown domestically

Explanation

The CPI measures the price changes of goods and services bought by consumers, including imported items like BMWs. Since BMWs are imported, their price increase affects the CPI but not the GDP deflator, which only considers domestically produced goods and services. Therefore, a rise in the price of imported BMWs leads to a higher increase in the CPI compared to the GDP deflator.