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ECN 204 (348)
Eric Kam (31)

Chapter 6.docx

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ECN 204
Eric Kam

Chapter 6Govt spending is exogenous and GDP that is the endogenousExogenous variables changes affect the changes in endogenous variablesConsumers Price Index CPI measures the typical consumers cost of living 5 Steps of calculating CPIDetermine the basket stats Canada surveys what consumers buyFind the prices data on prices of all the goods in basket Compute the baskets cost use data on prices to compute the total cost of the basket Choose a base year and compute the index cost of basket in current yearcost of basket in base year Compute the Inflation Rate Inflation rate Percentage change in CPI from year to year CPI this yearCPI last yearCPI last year EXAMPLE Chapter 6 Slide 7The CPI in the base year is always 100Commodity Substitution Bias The CPI overstates increases in the cost of living Introduction to New Goods increase in variety therefore the consumer has options to find products that are closer to meet their needsUnmea
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