ECO 1102 Lecture Notes - Lecture 4: Nominal Interest Rate, Real Interest Rate, Core Inflation

• School: University of Ottawa
• Department: Economics
• Course: ECO 1102
• Professor: Octavian Strimbu

Document Summary

When the consumer price index rises, the typical household has to spend more. The consumer price index is used to monitor changes in the cost of living over time dollars to maintain the same standard of living. Economists use the term inflation to describe a situation in which the economy"s overall price level is rising. Inflation rate is the percentage of change in the price level from the previous period. Consumer price index (cpi): overall measure of the cost of goods and services bought by a typical consumer. Every month, stats canada computes and report the cpi. It uses data on the prices of more than 600 different goods and services. Five steps: determine the basket, find the prices, compute the basket"s cost, choose a base year and compute the index, compute the inflation rate. Unmeasured quality change: the goods that we have right now are not the same as.