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ECON 105 Chapter Notes - Chapter 6: Gdp Deflator

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School
Simon Fraser University
Department
Economics
Course
ECON 105
Professor
Junjie Liu

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ECON 105 Full Course Notes
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Document Summary

Cpi is used to monitor changes in the cost of living over time. When cpi rises, the typical family has to spend more to maintain their standard of living. Consumer price index: a measure of the overall cost of the goods and services bought by a typical consumer: how it is calculated: Determine the basket: which prices are most important to the typical consumer. Choose a base year and compute the index. Cpi = (price of basket of goods and services in current year) (price of basket in base year) * 100. Compute the in ation rate: in ation rate: the percentage change in the price index from the preceding period. In ation rate in year 2 = (cpi in year 2) - (cpi year 1) (cpi year 1) * 100. Core inflation: a measure of the underlying trend of in ation.

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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.

Suppose, in the base year, a typical market basket purchased by an urban family costs $250. In Year 1, the same market basket cost $950. What is the consumer price index (CPI) for Year 1? If the same market basket costs $1,000 in Year 2, what is the CPI for Year 2? What was the Year 2 rate of inflation? 

Suppose, in the base year, a typical market basket purchased by an urban family costs $250. In Year 1, the same market basket cost $950. What is the consumer price index (CPI) for Year 1? If the same market basket costs $1,000 in Year 2, what is the CPI for Year 2? What was the Year 2 rate of inflation?Â