Textbook Guide Economics: Nominal Interest Rate, Real Interest Rate, Gdp Deflator
Document Summary
States" cpi and producer price index (ppi), which measures the overall costs of the goods and services bought by the average firm as opposed to the consumers: the cpi"s measurement can be inaccurate to the cost of living: It relies in a static weight of goods and services which can be inaccurate when demand for certain goods and services decrease or increase; this is called substitution bias. It relies in a static variety of goods and services which can be inaccurate when faced with the introduction of new goods, which may be an important aspect of the average consumer"s consumption. The nominal interest rate is the reported interest rate without appropriate indexation. The real interest rate is the interest rate accounting for the effects of inflation. The consumer price index or cpi measures the overall costs of the goods and services bought by the average consumer.
