ECON 2105H Study Guide - Midterm Guide: Cd Player, Core Inflation, Typewriter
17 Mar 2017
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Price level: the average level of prices and the value of money ( speed ) Inflation: the annual percentage change in the price level ( acceleration ) Inflation is a problem because of it unpredictability. It diverts resources from production: hyperinflation: an inflation rate exceeding 50% per month (often associated with wars, depressions, and political and social upheaval) Constructing the cpi: select the cpi basket, conduct a monthly price survey, calculate cpi. The cpi basket reflects the spending habits of: almost all residents of urban or metropolitan areas, represents about 87% of the population. Cpi=cost of cpi basket (current)cost of cpi basket (base period) x 100. An index is a tool that simplifies measurement of movements in a numerical series. Inflation rate=cpi (this year) - cpi (last year)cpi (last year) x 100. Real value =nominal value * base year cpinominal year cpi.
