Textbook Notes (368,434)
Canada (161,878)
Economics (818)
ECON 1100 (224)
Chapter 6

Chapter 6 Measuring the Price Level and Inflation

2 Pages
88 Views
Unlock Document

Department
Economics
Course
ECON 1100
Professor
Eveline Adomait
Semester
Winter

Description
Chapter 6: Measuring the Price Level and Inflation Thursday, January 24, 2013 1:51 PM 6.1 The Consumer Price Index: Measuring the Price Level Definitions Price Level- the overall level of prices at a point in time as measured by a price index such as the CPI Consumer Price Index (CPI)- for any period , measures the cost in that period of a standard basket of goods and services relative to the cost of the same basket of goods and services on a fixed year, called the base year Price Index- a measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year 6.2 Inflation Definitions Rate of Inflation- the annual percentage rate of change in the price level as measured for example, by the CPI Deflation- a situation in which the prices of most goods and services are falling over time so that inflation is negative 6.3 Adjusting for Inflation Definitions Normal Quantity- a quantity that is measured in terms of its current dollar value Real Quantity- a quantity that is measured in constant dollar terms Deflating (a nominal quantity) - the process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms Real Wage- the wage paid to workers measured in terms of real purchasing power Indexing- the practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index; prevents the purchasing power of the nominal quantity from being eroded by inflation 6.4 Nominal Versus Real Interest Rates Definitions Nominal Interest Rate- the type of interest rare you usually encounter in everyday life-the price paid per dollar borrowed per year Real Interest Rate- the nominal interest rate minus the inflation rate Anticipat
More Less

Related notes for ECON 1100

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit