ECON 2105 Lecture Notes - Lecture 6: Gdp Deflator, Interest Rate, Capital Good
Document Summary
Measure of the overall level of prices. Measure of the overall cost of goods and services. Computed and reported every month by the bureau of labor statistics. The bureau of labor statistics (bls) surveys consumers to determine what"s in the typical consumer"s shopping basket. The bls collects data on the prices of all the goods in the basket. Use the prices to compute the total cost of the basket. Chose a base year and compute the cpi. Cost of basket of goods and services in current year divided by cost o fbasket in base year. The percentage change in the cpi from the preceding period. Inflation rate = (cid:3047) (cid:3046) (cid:3032)(cid:3045) (cid:3046)(cid:3047) (cid:3032)(cid:3045) (cid:3046)(cid:3047) (cid:3032)(cid:3045) Over time, some prices rise faster than others. Consumers substitute toward good stht become relatively cheaper, mitigating the effects of price increase. The cpi misses this substitution because it uses a fixed basket of goods.