ECO 304L Chapter Notes - Chapter Unit 1: Ch 1-4: Market Basket, Gdp Deflator, Weighted Arithmetic Mean

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greenwalrus59

7 Oct 2017

School

UT-Austin

Department

Economics

Course

ECO 304L

Professor

M O S T A S H A R I, S H A L A H

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Document Summary

Alternative measures of inflation: to measure inflation for the whole economy, we need a way of. aggregating the many individual prices in the system. The basic idea is to come up with a statistic that is an appropriate weighted average of the individual prices in the economy. Then, inflation is measured as the percentage change in this statistic over time. Suppose we create a price index for student weekends when the typical student buys one large pizza for and three cokes for each in 2009. We will choose 2009 as our base year. Now suppose that the price of the large pizza rises to and the price of a coke rises to . 25 in 2010. Then the student weekend market basket will cost . 75. Also assume that the price of pizza in 2008 was . 50, and the cost of a coke was , so the market basket cost . 50 in 2008.

Related Questions

Calculating inflation using a simple price index:

Consider a fictional price index, the College Student Price Index (CSPI), based on a survey of annual purchases of a typical college student. Suppose the following table shows information on the market basket for the CSPI and the prices of each good in 2012, 2013, and 2014

	Quantity in basket	2012	2013	2014
	Quantity in basket	Price($) Cost of basket($)	Price($) Cost of basket($)	Price($) Cost of basket($)
Notebooks	10	5 50	7	11
Calculators	1	100 100	110	140
Large coffees	150	1 150	1	1
Energy drinks	50	2 100	3	4
Textbooks	10	100 1000	120	150
Total cost		1400
Price index		100

The cost of each item in the basket and the total cost of the basket are shown for 2012.

Perform these same calculations for 2013 and 2014, and enter the results in the table.

Suppose the base year for this price index is 2012. Calculate and enter the value of the CSPI for the remaining years in the last row of the table. Between 2012 and 2013, the CSPI increased by..........

Between 2013 and 2014, the CSPl increased by..........

cyanhound711

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

redcattle972

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.

ECO 304L Chapter Notes - Chapter Unit 1: Ch 1-4: Market Basket, Gdp Deflator, Weighted Arithmetic Mean

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