ECO 1102 Lecture Notes - Lecture 6: Real Interest Rate, Nominal Interest Rate, Gdp Deflator

32 views2 pages

bronzepug465

26 Apr 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

roza220x and 38789 others unlocked

ECO 1102 Full Course Notes

Verified Note

46 documents

Document Summary

Eco 1102: chapter 6) measuring the cost of living. The consumer price index is used to monitor changes in the cost of living over time. When the consumer price index rises, the typical family has to spend more 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. The inflation rate is the percentage change in the price level from the previous period. The consumer price index (cpi): the overall measure of the cost of the goods and services bought by a typical consumer. Five steps to compute the inflation rate: determine the basket, find the prices, compute the basket"s cost, chose a base year and compute the index, compute the inflation rate. The gdp deflator versus the consumer price index. The gdp deflator reflects the current level of prices relative to the level of prices in the base year.

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.

amaranthbuffalo689

TRUE or FALSE?

1. When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

2. Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

3. When a new good is introduced, consumers have more variety from which to choose, and this, in turn, increases the cost of maintaining the same level of economic well-being.

4. The real interest rate is the interest rate corrected for inflation.

5. Like physical capital, human capital is a produced factor of production.

crimsonalligator541

1. The peak of the business cycle

a. usually occurs when the natural rate of unemployment is equal to its actual rate.

b. is the point where an expansion ends and a recession begins

c. is the minimum level of nominal GDP.

2. The consumer price index (CPI) reflects

a. the median annual expenditures of a typical single family of four on consumer goods

b. the average price of all goods and services computed from the ratio of nominal GDP to real GDP.

c. the changes in the prices of goods and services typically purchased by consumers.

3. The Consumer Price Index is NOT used

a. to measure the average price level of all final goods and services produced

b. to compute the U.S. inflation rate.

c. to measure changes in the cost of living

4. Which of the following is true of a price index that uses a fixed market basket?

a. It excludes new goods and services

b. It accurately predicts the impact of rising prices when purchases are made at superstores.

c. It overstates the importance of items that fall in price.

5. A quality-change bias in the construction of the CPI arises because

a. big box stores that carry electronic goods routinely run sales to reduce their inventories before stocking new models.

b. consumers also shop at superstores or outlet stores

c. newer versions of a product might be more expensive but could also be better than the older version.

greydeer734

ECO 1102 Lecture Notes - Lecture 6: Real Interest Rate, Nominal Interest Rate, Gdp Deflator

ECO 1102 Full Course Notes

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

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

ECO 1102 Lecture 6: Lecture 6

ECO 1102 Lecture Notes - Lecture 6: Real Interest Rate, Nominal Interest Rate, Gdp Deflator

Related Questions