ECON 200 Lecture Notes - Lecture 32: Gdp Deflator, Nominal Interest Rate
27
ECON 200 Full Course Notes
Verified Note
27 documents
Document Summary
When the price of oil rises, the cpi rises by much more than does the gdp deflator because oil is normally an import which isn"t included in cpi. 2. concerns how various prices are weighted to yield a single number for the overall level of prices. If the prices of different goods and services are changing by varying amounts, the way we weight the various prices matters for the overall inflation rate. Two measures of inflation generally move together. Various forces, including overall economic growth and the increasing income shares earned by superstars, have substantially raised the living standards of the best athletes. Indexed - the automatic correction by law or contract of a dollar amount for the effects of inflation. Many long-term contracts between firms and unions include partial or complete indexation of the wage to the cpi. Such a provision, called a cost-of-living allowance (or cola), automatically raises the wage when the cpi rises.
