ECON 200 Lecture Notes - Lecture 12: Price Level, The Automatic, Real Interest Rate

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mauvecricket694

26 Oct 2016

School

University of Arizona

Department

Economics

Course

ECON 200

Professor

Ryan Johnson

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ECON 200 Full Course Notes

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The data of macroeconomics: measuring the cost of living. Consumer price index (cpi) is used to monitor changes in the cost of living over time. When it rises, the typical family has to spend more money to maintain the same standard of living. Is a measure of the overall cost of the goods and services bought by a typical consumer. Each month, the bureau of labor statistics (bls) computes and reports the cpi. Bls uses data on the prices of thousands and goods and services to calculate cpi and inflation rate. The five steps for calculating cpi: fix the basket: determine which prices are most important to typical consumer. Cpi = (price of basket in current year price of basket in base year) x 100: compute the inflation rate: use cpi to calculate the inflation rate. Inflation rate in year x = ((cpi in year x cpi in year 1) cpi in year 1) x 100.

Related Questions

Table 24-7. The table below applies to an economy with only two goods â hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.

Year	Price of hamburgers	Price of hot dogs
2009	$5	$3
2010	5.50	3.30
2011	5.61	3.63

Refer to Table 24-7. Between 2009 and 2011, the cost of living increased by

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

A. the CPI is calculated more often than the GDP deflator is.

B. the CPI is easier to measure.

C. the GDP deflator cannot be used to gauge inflation.

D. the CPI better reflects the goods and services bought by consumers.

A COLA automatically raises the wage when:

A. the consumer price index increases.

B. the producer price index increases.

C. taxes increase.

D. GDP increases.

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.

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Which of the following statements is true about the consumer price index (cpi):

A.It measures cost of representative basket of goods at the level of first significant commercial transaction

B.It measure of the average prices paid by consumers for all goods and services

C.It is used to measure the standard of living in an economy

D.It measures the average prices paid by consumers for a fixed basket of goods services

E. None of the above

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ECON 200 Lecture Notes - Lecture 12: Price Level, The Automatic, Real Interest Rate

ECON 200 Full Course Notes

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