ECON102 Lecture Notes - Gdp Deflator

• School: University of Waterloo
• Department: Economics
• Course: ECON102
• Professor: Angela Trimarchi

Document Summary

Inflation : a rise in the overall level of prices. Deflation : a fall in the overall level of prices. Disinflation : a decrease in the rate of inflation. 4 steps to constructing a price index: fix the basket, find the prices, compute the basket"s cost, choose a base year and compute the index. Cost of a fixed basket in current year * 100% Cost of a fixed basket in base year. Cost of basket in the current year (1991): If the cpi in year 1 is 125 and the cpi in year 2 is 150, calculate the inflation rate. 20% - measured by the percent change in the cpi. Inflation: measured by the percent change in the cpi. Allows you to see changes in the cost of living and inflation rates for any years between 1914 and today. For example, products that cost in 1980 would cost . 29 in.