Class Notes (836,414)
Canada (509,777)
Economics (490)
ECON 105 (187)
Lecture 8

Econ 105 Lecture 8 Jan 31st.doc

2 Pages
124 Views
Unlock Document

Department
Economics
Course
ECON 105
Professor
Brian Krauth
Semester
Winter

Description
Econ 105 Lecture 8 Jan 31st Chapter 6, The price level and the inflation rate -$1 buys less than it did 20 years ago. We observe a general rise in prices (inflation), but not all prices rise at the same rate. -Some goods go up, some stay where they are, and some even go down. We would like to have a single number (a price index) that measures typical prices. We have 2 main price indices: 1) GDP deflator: weighs by production, in current year. 2) CPI: weighs by a fixed market basket that represents typical household purchases. (doesn't have units) Ex: 2010 = base year ******see notebook for table****** ( 1 ) CPI(2010) = (cost of basket in current year) / (cost of basket in base year) x 100 = ((10 x 3) + (1.5 x 70)) / ((10 x 3) + (1.5 x 70)) x 100 = 135 / 135 x 100 = 100 CPI(2011) = ((10 x 4) + (1.5 x 100)) / ((10 x 3) + (1.5 x 70)) x 100 = 190 / 135 x 100 = 140 Inflation rate = growth rate of price index. Inflation (by GDP deflator) = (140 - 100) / 100 x 100% = 40% Inflation (by CPI) = (141 - 100) / 100 x 100% = 41% We also have a few other price indices: 1) Regional CPI 2) CPI for specific categories of goods 3) Core CPI What we use the CPI for: 1) To compare dollar amounts across time. 2) As something for policy makers to watch. 3) To index various ******* and government benefits. Limitations of the CPI as a measure of the cost o
More Less

Related notes for ECON 105

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit