ECON2420 Lecture Notes - Lecture 1: Fixed Investment, Autonomous Consumption, Consumption Function
Document Summary
Lecture 1: the basic concepts of macroeconomics & the goods market (part 2) Many economists believe cpi overstates inflation because of: substitution bias when the price of a product increases substantially, consumer tend to substitute other alternatives with lower prices. And since cpi is a fixed-weight price index, it wouldn"t predict the impact on the price increase on the consumer"s budget: quality bias over time, technological advances increase the life and usefulness of products. As more people work, national output increases causing wages to increase, consumers to have more money to spend, demanding more goods & services and finally causing the prices to increase. Low inflation. t e a r t l n e m y o p m e n. The national income account divides gdp into 4 categories of spending: consumption (c) It consists of the goods & services bought by households. It consists of goods bought for future use.
