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Chapter 7: d (page 152)

In what way are the PPI and CPI likely to diverge for a while following a sustained increase in import prices? Explain briefly.

Short Answer

Expert verified

A supported expansion in import costs prompts a difference in PPI and CPI.

Step by step solution

01

introduction

An expansion in the costs of imported inputs prompts an ascent in makers' expense of creation. Be that as it may, this expansion in cost doesn't get quickly sent into the more exorbitant cost of products sold by them.

02

explanation

In this manner, the PPI isn't quickly raised because of an ascent in the import costs.

Then again, the CPI incorporates the costs of a purchaser bin of merchandise including imported products. In this manner, when import costs rise CPI increments quickly making the CPI ascend by a bigger sum than the PPI.

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