ECON 1BB3 Lecture Notes - Lecture 11: Nominal Interest Rate, Gdp Deflator, Real Interest Rate

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Hannah Holmes

Document Summary

Inflation- comparing dollars from one time period to another. Indexing = old age security; canada pension plan transfer paymets; only one is indexed not part of gdp: if it is indexed it means that the payment increases when the inflation increases. If none of these problems existsed the inflation rate would be lower. For some racquet sports there have been increases in the size of racquets and the methods and materials used fore making them have improved. Cpi vs gdp deflator: whats in the baskets, cpi- goods and services bought by typical consumers, gdp deflator- reflects prices of all goods and services produced domestically, cpi prices change, quantities stay fixed. Gdp deflator quantites change, prices stay fixed because when calculating real gdp you use prices from the base year with current year quantities ex. A german automobile company produces cars in canada, some of which are exported to other nation. If the price of these cars increases, the gdp deflator.