ECON 2002.01 Chapter Notes - Chapter 6: Business Cycle, Market Basket, National Bureau Of Economic Research
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ECON 2002.01 Full Course Notes
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*inflation does not mean that all prices are rising. Macroeconomic goals: stable growth, stable prices, (cid:862)full(cid:863) e(cid:373)ploy(cid:373)e(cid:374)t. Changes in the business cycle lead to changes in the average prices. Inflation: an increase in the average level of prices. Inflation means that overall purchasing power of money is being reduced. Price level=average level of prices of goods and services produced or sold in the economy during a specified period of time. Cpi= current value of the market basket x100. To calculate cpi, 2 things must be established: what goods and services will be used for the market basket, the base year. *value of the price index is always 100 in the base year. Rate of inflation is calculated at the % change in the price index over a period of time. Actual base period for cpi is 3 year span from 1982-1984. ^this is no longer accurate of what a typical household buys.