The CPI vs' the GDP Deflator

1
The CPI vs. the GDP Deflator

• The Epic, Cataclysmic Struggle

2
Both measure changes in price, but

• GDP deflator measures domestically-produced CPI
  measures consumer goods regardless of origin.
• Boeing jet- in GDP deflator, but not in CPI.
• Volvo- in CPI (as automobile) but not in GDP
  deflator.

3
Difference 2

• CPI uses fixed basket of consumer goods GDP
  deflator measures price of all currently produced
  goods/services.
• Correlation still exists- both tend to move
  together fairly regularly.

4
Comparing CPI and salaries Are We Better Off
Today?

• You will need
• Salary level of a past year
• CPI of the past year
• CPI of the current (modern) year
• Old salary (in terms of its modern
  worth/equivalent)
• Old salary x CPI current
• CPI old

5
For Example

• President Herbert Hoovers salary in 1931 was
  75,000.
• Obamas salary in 2009 is 400,000.
• CPI from 1931 is 15.2
• CPI from 2009 is estimated to be 218.4
• Who had the higher salary?