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ECN 204 Lecture Notes - Capital Good, Real Interest Rate, Canada Pension Plan

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skywombat72
30 Apr 2012
School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Christopher Gore

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Document Summary

The basis of cost of living adjustments (colas) in many contracts and in social security. Consumer price index (cpi)- is a measure of the overall cost of the goods and services bought by a typical consumer. How cpi is calculated: determine the basket. Statistics canada surveys consumers to determine what is in the typical consumer"s shopping basket. Which price is most important to the typical customer. Use the data on prices to calculate the cost of the basket of goods and services at different times. Use the data on prices to compute the total cost of the basket: choose a base year and compute the index. The fourth step is to designate one year as the base year, which is the benchmark against which other years are compared. Cpi = 100 * [cost of basket in current year/cost of basket in previous year: compute the inflation rate. Use the consumer price index to calculate the inflation rate.

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Related Questions

There are many different types of market baskets that economists measure. For example, the market basket for consumers called the 'Consumer Price Index' tracks the prices associated with the typical consumer's purchases of goods and services. The 'Producer Price Index' tracks the prices that firms receive when selling their goods and services.

Indicate the appropriate market basket to use in each of the following instances.

Consumer Price Index:

a) Measuring differences in the cost of living between different cities.
b) Examining price changes that might affect businesses.
c) Measuring the cost of living for a typical consumer.


Producer Price Index:

A) Measuring differences in the cost of living between different cities.
B) Examining price changes that might affect businesses.
C) Measuring the cost of living for a typical consumer.

What index is used to measure the average prices paid by a typical family? 

A. consumer price index (CPI).

B. Producer price index (PPl)

C. inflation rate index.

D. aggregate price level index

The consumer price index is used to:
 
(i) monitor changes in the level of wholesale prices in the economy.
(ii) monitor changes in the cost of living over time.
(iii) monitor changes in the level of real GDP over time.
(iv) monitor changes in the stock market.
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