Log in
HomeTextbook Notes300,000US110,000

ECON 103 Chapter Notes - Chapter 11: Price Level, Gdp Deflator, The Automatic

24 views2 pages
goldshark321
13 Jan 2017
School
University of Illinois
Department
Economics
Course
ECON 103
Professor
Mc Dermott Eric

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Consumer price index (cpi: a measure of the overall cost of the goods and services bought by a typical consumer, price of basket of goods and services in current year price of basket in base year 100. Inflation rate: the percentage change in the price index from the preceding period. Inflation rate in yr 2 = cpi in year 2 - cpi in year 1cpi in year 1100. Producer price index: a measure of the cost of a basket of goods and services bought by firms. Problems in measuring the cost of living: substitution bias. When prices change from one year to the next, they do not all change proportionately; some prices rise more than others. Consumers respond to these differing prices by buying less. When a new good is introduced, consumers have more variety from which to choose, and this in turn reduces the cost of maintaining the same level of economic well being: unmeasured quality change.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECON 103 Chapter Notes - Chapter 11-1: Gdp Deflator
goldshark321
ECON 103 Lecture Notes - Lecture 10: Gdp Deflator, Nominal Interest Rate, Real Interest Rate
carminegerbil877
ECON 103 Lecture Notes - Lecture 4: Capacity Utilization, Market Basket
burgundybee439

Related Questions

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

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

 

 

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.