ECON 1110 Lecture Notes - Lecture 2: Gdp Deflator
Document Summary
Consumer price index measure of overall level of prices quantity fixed tracks changes in households" costs of living focuses on consumer necessary for colas surveys a basket of goods from consumers tracks changes monthly. Cpi = cost of basket in that month/cost of basket in base * 100 basket consists of everyday goods e. g. education, transportation, food, apparel, housing typically overstates inflation substitution bias: prices increasing basket changes. Cpi doesn"t account for introduction of new goods increases value of consumers" dollar. Cpi doesn"t decrease w/ this quality of goods increasing causes value of consumers" dollar to increase bias typically under 1% Cpi v. gdp deflator prices of capital goods included in gdp excluded from cpi fixed basket. Gdp is flexible imported consumer goods included in cpi excluded from gdp deflator. Bls obtains this information by surveying businesses & households. The establishment survey: scans payrolls of randomly selected businesses.
