ECON 2 Lecture Notes - Lecture 2: Market Basket, Gdp Deflator, Time Series

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blushsquirrel508

6 Feb 2018

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Lec 2, 3 - measuring the cost of living (chapter 24) How can we correct interest rates for inflation: the consumer price index (cpi) Consumer price index (cpi): measures the typical consumer"s cost of living. Serves as the basis of cost of living adjustments (colas) in many contracts and in social security. Fix the basket : bureau of labor statistics (bls) surveys consumers to determine what is in the typical consumer"s (cid:3247)shopping basket(cid:3248) Find the prices: bls collects data on the prices of all the goods in the basket. Compute the basket"s cost: use the prices to compute the total cost of the basket. Choose a base year and compute the index. Compute the inflation rate - the percentage change in the cpi from the preceding period. Cpi (in any year) = 100 (cid:3030)(cid:3042)(cid:3046)(cid:3047) (cid:3042)(cid:3033) (cid:3029)(cid:3028)(cid:3046)(cid:3038)(cid:3032)(cid:3047) (cid:3041) (cid:3030)(cid:3048)(cid:3045)(cid:3045)(cid:3032)(cid:3041)(cid:3047) (cid:3032)(cid:3028)(cid:3045) (cid:3030)(cid:3042)(cid:3046)(cid:3047) (cid:3042)(cid:3033) (cid:3029)(cid:3028)(cid:3046)(cid:3038)(cid:3032)(cid:3047) (cid:3041) (cid:3029)(cid:3028)(cid:3046)(cid:3032) (cid:3032)(cid:3028)(cid:3045) inflation rate = (cid:3047) (cid:3046) (cid:3032)(cid:3028)(cid:3045) (cid:3039)(cid:3028)(cid:3046)(cid:3047) (cid:3032)(cid:3028)(cid:3045) (cid:3039)(cid:3028)(cid:3046)(cid:3047) (cid:3032)(cid:3028)(cid:3045)

Related Questions

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.

amaranthbuffalo689

A price confusion problem is best described as what?

a. the difficulty producers have in determining whether higher prices are due to increased demand or inflation.

b.the difficulty consumers have in determining whether real prices have risen in order to decide whether they should buy more or less.

c.the difficulty that producers have in determining whether a wage increase will lead to an increase in real costs.

d.the problem consumers have in determining whether relative prices have changed when all prices are increasing, albeit at different rates.

e.the problem both consumers and producers face in interpreting consumer price index (CPI) data from the Bureau of Labor Statistics (BLS)

aquamarinedonkey763

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.

greydeer734

ECON 2 Lecture Notes - Lecture 2: Market Basket, Gdp Deflator, Time Series

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