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Answer on Macroeconomics Question for Mary

Question #37432
A country devaluates its currency causing inflation, which index will estimate inflation more in the short run between cpi and gdp deflator?
Expert's answer
Answer on Question#37432 - Economics - Macroeconomics

The GDP deflator and CPI diverge in a few ways.
The GDP deflator includes goods and services produced domestically, while the CPI includes domestically made and imported goods and services.
While the CPI basket is fixed, the GDP deflator reflects what is produced at a given time.
So, CPI will estimate inflation more in the short run.

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