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Macroeconomics ECON 2020U Lecture 2

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ECON 2020U
Peter Cheung

Macroeconomics Lecture 2Consumer Price Index CPI y Inflation refers to when the economys overall price level is rising y Inflation rate is the percentage change in the price level y CPI is a measure of the overall cost of the goods and services bought by a typical consumer y Used to monitor changes in the cost of living over timeDetermine the basket y Determine which prices are most important y If the typical consumer buys more hot dogs than hamburgers then the price of hot dogs is more important therefore is given more weight in measuring the cost of livingHow CPI is calculated y Find the prices of each good and service in the basket for each point in time y Use the data on prices to calculate the cost of the basket of goods and services at different times y Designate one year as the base year y Compute the index by dividing the price of the basket in one year by the price in t
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