The Impact of Price Increase in Foreign-made Athletic Apparel on U.S. Consumer Price Index
Introduction
Explanation
When most athletic apparel bought by U.S. Consumers is imported from other nations, an increase in the price of foreign-made athletic apparel will have a significant impact on the U.S. economy. This is because imported goods are not included in the GDP deflator but are included in the Consumer Price Index. The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. On the other hand, the GDP deflator is a measure of the price level of all goods and services included in Gross Domestic Product (GDP). If the price of foreign-made athletic apparel increases, it will make goods in the United States relatively more expensive compared to goods in other countries. As a result, the Consumer Price Index will be influenced more than the GDP deflator.Final Answer
If the price of foreign-made athletic apparel increases, it will make goods in the United States relatively more expensive compared to goods in other countries, affecting U.S. exports and imports. Explanation: The impact of the increase in the price of foreign-made athletic apparel on the United States can be seen in both exports and imports. A rise in the price of foreign-made athletic apparel will lead to a decrease in the quantity of U.S. exports sold, as they become relatively more expensive compared to goods in other countries. This will result in a decrease in net export expenditures. On the other hand, U.S. imports from abroad will become relatively cheaper due to the increased price of foreign-made athletic apparel. This will lead to an increase in the quantity of imports, further affecting the U.S. economy. In conclusion, the higher domestic price level, compared to price levels in other countries, will have repercussions on the U.S. Consumer Price Index.Assume most athletic apparel bought by U.S. Consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.
Consumer Price Index to increase more than the GDP deflator.