ECON 1BB3 Lecture Notes - Lecture 5: Gdp Deflator, Interest Rate, Nominal Interest Rate

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Cpi is based on a fixed basket of goods and services; overstates inflation. Some price changes reflect quality improvements; overstates inflation. Reflects prices of all goods and services produced domestically. You have decided not to buy a pair of shoes that cost and interest put the into a saving account earning 5% interest per year. What if the prices in the economy increased by 10% Interest rate without correction for inflation measures the increase in the number of dollars in your bank account.