ECON 002 Lecture Notes - Lecture 4: Real Wages, Expenditure Function
Document Summary
Econ-002: macro economics lecture 4 inflation part 3. Cpinew / cpiold = pricenew / priceold = amountnew / amountold. Real wage = 100 * nominal wage/ cpi. Real interest rate = nominal interest rate inflation rate. We should know by now real stands for the actual power of the wage/interest rate. When the real wage/ interest rate differs from nominal wage/ interest rate the professor calls it paradoxical this will show up on the test. Pcedt = 100 * (value of consumption component of ngdpt) / (value of consumption component of rgdpt ) The deflator measures the consumption component of gdp: import would a part of this. Although import doesn"t affect gdp because the consumption component and import component in the gdp expenditure function cancel out, it is counted in the pced function. Inflation rate = 100 * (pcedt pcedt-1 ) / (pcedt-1 ) Pced and cpi contain only consumption goods, not investment goods.
