ECON 103 Chapter Notes - Chapter 11-1: Gdp Deflator
20 Jan 2017
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11-1 consumer price index (cpi) measure of overall cost of goods and services brought by a typical consumer: calculated by bls. In year something is first introduced, it reduces the cost of living (cuz ppl could achieve same amount of economic well being with less number of dollars) but cpi doesn"t account for that: unmeasured quality change. Value of dollar rises, if quality rises but price remains same so value of dollar rises. If quality of good falls while price remains same, value of dollar rises. 11-1c two measures of inflation: gdp deflator vs cpi: they usually tell a similar story, gdp deflator = nominal gdp / real gdp. Current level of prices relative to the level of prices in the base year. Fixed basket from base year: plane price increase are a part of gdp deflator but not cpi (cuz typically ppl don"t buy planes, increase in price of imported cars is part of cpi but gdp deflator.
