ECO 1102 Chapter Notes - Chapter 6: Core Inflation, Gdp Deflator, Nominal Interest Rate

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26 Aug 2016

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A measure of the overall cost of the goods and services bought by a typical consumer. Inflation rate: the percentage change in the price index from the preceding period. Inflation rate in year 2= cpi in year 2- cpi in year 1/ cpi in year 1 x 100. Core inflation: a measure of the underlying trend of inflation. Price index tries to gauge how much incomes must rise in order to maintain a constant standard of living. 3 problems: commodity substitution bias: when prices change from one year to the next, they do not all change proportionately. Gdp deflator reflects the prices of all goods and services produced domestically whereas the consumer price index reflects the prices of all goods and services bought by consumers. Consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year.

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.

amaranthbuffalo689

An advantage of the personal consumption expenditures price index (PCE) over the consumer price index (CPI) as a measure of inflation is that the PCE

A) includes the prices of consumer goods, but not consumer services.

B) includes the prices of consumer services, but not consumer goods.

C) includes the prices of more consumer goods and services.

D) is a fixed market-basket price index that does not allow the mix of products to change each year

redcattle972

Which of the following statements is true about the consumer price index (cpi):

A.It measures cost of representative basket of goods at the level of first significant commercial transaction

B.It measure of the average prices paid by consumers for all goods and services

C.It is used to measure the standard of living in an economy

D.It measures the average prices paid by consumers for a fixed basket of goods services

E. None of the above

beigebee838

ECO 1102 Chapter Notes - Chapter 6: Core Inflation, Gdp Deflator, Nominal Interest Rate

ECO 1102 Full Course Notes

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