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ECON 20B Lecture 3: Measuring_Inflation_notes

69 views5 pages
ochreeel210
5 Jun 2017
School
UC-Irvine
Department
Economics
Course
ECON 20B
Professor
William Branch

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ECON 20B Full Course Notes
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ECON 20B Full Course Notes
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Document Summary

Consumer price index (cpi) is a measure of the overall cost of the goods and services bought by a typical consumer. Note: cpi is a statistic compiled by the bureau of labor statistics (bls). How to calculate the cpi: calculate in 4 easy steps: Step 3 compute the cost of purchasing the basket. Step 4 choose a base year (arbitrary) and compute index: Example: suppose a typical consumer consumes ipad"s and bell peppers, and bls calculates the following: Step 1 basket = 1 ipad, 5 bell peppers. Step 3 cost of basket: now nd cpi: 2011 : 1 + 5 = . 2012 : 1 + 5 = . 2013 : 1 + 5 = . Calculating in ation rate: suppose want to know the in ation rate the rate at which prices change over time, use the cpi and compare to previous year: in ation in 2012 = in ation in 2013 =

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Related Questions

1. The peak of the business cycle

a. usually occurs when the natural rate of unemployment is equal to its actual rate.

b. is the point where an expansion ends and a recession begins

c. is the minimum level of nominal GDP.

2. The consumer price index (CPI) reflects

a. the median annual expenditures of a typical single family of four on consumer goods

b. the average price of all goods and services computed from the ratio of nominal GDP to real GDP.

c. the changes in the prices of goods and services typically purchased by consumers.

3. The Consumer Price Index is NOT used

a. to measure the average price level of all final goods and services produced

b. to compute the U.S. inflation rate.

c. to measure changes in the cost of living

4. Which of the following is true of a price index that uses a fixed market basket?

a. It excludes new goods and services

b. It accurately predicts the impact of rising prices when purchases are made at superstores.

c. It overstates the importance of items that fall in price.

5. A quality-change bias in the construction of the CPI arises because

a. big box stores that carry electronic goods routinely run sales to reduce their inventories before stocking new models.

b. consumers also shop at superstores or outlet stores

c. newer versions of a product might be more expensive but could also be better than the older version.