ECON 401 Lecture Notes - Lecture 7: Producer Price Index, Market Basket, Savings Account
Document Summary
Inflation rate: percentage increase in the price level from one year to the next. Consumer price index: an average of the prices of goods purchased by a typical family; Producer price index: an average of the prices received by producers at all stages; Changes in the ppi can give an early warning about future movements in the cpi. Cpi is also called the cost-of-living index because it can be used to adjust wages: Wage in 2014 dollars = wage in 1914 dollars * Nominal interest rate: the stated interest rate on your savings account. Real interest rate = nominal interest rate inflation rate. Inflation can change the distribution of income: fixed income. Anticipated inflation: consumers, workers, and firms can adjust contracts for it;
