Earlier in this chapter we saw another measure of prices—the implicit price deflator for GDP, which is the ratio of nominal GDP to real GDP. The GDP deflator and the CPI give somewhat different information about what’s happening to
the overall level of prices in the economy. There are three key differences between the two measures.
The first difference is that the GDP deflator measures the prices of all goods
and services produced, whereas the CPI measures the prices of only the goods
and services bought by consumers. Thus, an increase in the price of goods
bought by firms or the government will show up in the GDP deflator but not in