ECON 112 Lecture Notes - Lecture 11: Price Level, Nominal Interest Rate, Gdp Deflator
22 Oct 2015
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Wednesday, october 14, 2015. Measure the cost of living. Consumer price index (cpi) i. ii. iii. Measure of the overall level of prices. Measure of the overall cost of goods and services. Bought by a typical consumer. Which prices are most important to the typical consumer. At each point in time. Isolate the effects of price changes. Chose a base year and compute the cpi i. ii. Price of basket of goods and services in current year. Divided by price of basket in base year. Inflation rate in year 2 = From the preceding period b. Iii. i. ii. i. i. ii. i. i. The consumer price index a. Percentage change in the price index. Producer price index, ppi b. c. Measure of the cost of a basket of goods and services bought by firms. Changes in ppi are often thought to be useful in predicting changes in cpi. Problems in measuring the cost of living.
