ECON 001A Chapter Notes - Chapter 11: Gdp Deflator, Producer Price Index

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brownseal713

5 Apr 2016

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Used to measure the quantity of goods and services that the economy are producing. A measure of the overall cost of the goods and services bought by a typical consumer. Used to monitor changes in the cost of living over time. Cpi = (price of goods and services in current year/price of goods and. * base year is your designated benchmark year, the one used to compare. Describes a situation in which an economy"s overall price level is increasing. The percentage change in the price level from the previous period. Inflation rate in year 2 = (cpi in year 2 - cpi in year 1)/(cpi in year 1)x100. Measures the cost of the goods and services purchased by firms (rather than customers) Consumers will buy the goods whose prices have risen less overstates the cost of living. Consumers have more choices and each dollar is worth more. Cpi doesn"t reflect the increase of the dollar value.

Related Questions

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

greycoyote29

Table 24-7. The table below applies to an economy with only two goods â hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.

Year	Price of hamburgers	Price of hot dogs
2009	$5	$3
2010	5.50	3.30
2011	5.61	3.63

Refer to Table 24-7. Between 2009 and 2011, the cost of living increased by

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

A. the CPI is calculated more often than the GDP deflator is.

B. the CPI is easier to measure.

C. the GDP deflator cannot be used to gauge inflation.

D. the CPI better reflects the goods and services bought by consumers.

A COLA automatically raises the wage when:

A. the consumer price index increases.

B. the producer price index increases.

C. taxes increase.

D. GDP increases.

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

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ECON 001A Chapter Notes - Chapter 11: Gdp Deflator, Producer Price Index

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