Athletic Apparel and the GDP Deflator

What happens to the GDP deflator if the price of imported athletic apparel increases in Canada? If the price of imported athletic apparel increases in Canada, both the GDP deflator and CPI are likely to increase. The extent to which each increases would depend on a variety of factors including the specific weightage of the athletic apparel in the basket of goods and services considered for each index.

Most of the athletic apparel sold in Canada is imported from other nations. Therefore, if the price of this imported athletic apparel increases, it would have an impact on the GDP deflator. The GDP deflator is a measure that reflects the ratio of nominal GDP to real GDP and is used to adjust for inflation when comparing economic output over time.

Given that the majority of the athletic apparel sold in Canada is imported from other nations, an increase in the price of this imported apparel would likely lead to an increase in the GDP deflator. This is because the GDP deflator takes into account the prices of all goods produced domestically, including imports like athletic apparel. If the cost of these goods increases, then the GDP deflator would also increase.

Similarly, the Consumer Price Index (CPI) would also likely increase as a result of the higher prices for imported athletic apparel. The CPI measures the average change in prices paid by urban consumers for a basket of goods and services, which includes imported goods and services. Therefore, an increase in the price of imported athletic apparel would contribute to an overall increase in the CPI as well.

In conclusion, if the price of imported athletic apparel increases in Canada, both the GDP deflator and CPI are expected to increase. The specific extent of the increases would vary depending on factors such as the weightage of athletic apparel in the indices. It's important to consider these impacts when analyzing the effects of price changes in imported goods on economic indicators.

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