Economics 10b Chapter Notes - Chapter 24: Gdp Deflator, Normal Good, Real Interest Rate
10 Feb 2014
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Labor, computes and reports the consumer price index: how the consumer price index is calculated by the bls, fix the basket: determine which prices are most important to the typical consumer. Consumers substitute toward goods that have become relatively less expensive as well as tend to buy less of a normal good when a price rises. If the quality of a good deteriorates from one year to the next while its price remains the same, the value of a dollar falls, because you are getting a lesser good for the same amount of money. If the quality rises from one year to the next, the value of the dollar rises. The bls tries to account for the quality change by adjusting the price of the good. A plane bought by boeing would show up in the gdp deflator, but not in the consumer price index.
