# ECO102H1 Lecture Notes - Gdp Deflator, Allocative Efficiency

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14 Apr 2014
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## Document Summary

Construction: show the cost of a basket of goods and services relative to the cost of the same basket of goods in the base year. Gdp deflator is used to measure all goods produced(exports) Measure price changes - how inflations impacts everyday, consumed(imports) Calculate: cpi = [vob in current year] / [vob in base year] * 100. Vob = value of the basket of goods. Step 1: survey consumers to determine a fixed basket of goods. Step 2: find the price of each good in each year. Year price of hot dogs price of hamburgers. Step 3:compute cost of basket of goods in each year. 1 ( per hot dog 4) + ( per hamburger 2) = . 2 ( per hot dog 4) + ( per hamburger 2) = . Step 4: choose one year as a base year (year 1) and compute cpi in each year. Step 5: use cpi to compute inflation rate from previous year.