That depends. Different measures of inflation are required for different purposes. Consequently, the GDP Accounts provide several measures to serve these various purposes.
Gross domestic purchases prices. BEA's featured measure of inflation in the U.S. economy is the percent change in the price index for gross domestic purchases. This index measures the prices of goods and services purchased by U.S. residents, regardless of where the goods and services are produced. The gross domestic purchases price index is derived from the prices of personal consumption expenditures, gross private domestic investment, and government consumption expenditures and gross investment. Thus, for example, an increase in the price of imported cars would raise the prices paid by U.S. residents and thereby directly raise the price index for gross domestic purchases.
GDP prices. Another aggregate price measure is the price index for GDP, which measures the prices of goods and services produced in the United States. In contrast to the price index for gross domestic purchases, this index would not be directly affected by an increase in the price of imported cars. Imports are excluded from GDP because they do not represent U.S. production.
For the second quarter of 2008, the price index for gross domestic purchases increased 4.5 percent (at an annual rate), while the GDP price index increased 3.2 percent. The smaller increase in the price index for GDP than for gross domestic purchases indicated that prices paid by U.S. residents were increasing more rapidly, on average than the prices they received for their production. The price index for imports of goods and services increased 16.6 percent in the second quarter, while the price index for exports of goods and services increased 10.6 percent. See the depreciation FAQ for more information on the effects of dollar depreciation in the GDP accounts.