Term
| consumer price index (CPI) |
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Definition
| shows the cost of a basket of goods and services relative to the cost of the same basket in the base year |
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Term
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Definition
| used to measure the overall level of prices in the economy |
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Definition
| the percentage change in the price index from the preceding period |
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Term
| it does not take into account consumers’ ability to substitute toward goods that become relatively cheaper over time |
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Definition
| Reason 1 the consumer price index is an imperfect measure of the cost of living |
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Term
| it does not take into account increases in the purchasing power of the dollar due to the introduction of new goods |
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Definition
| Reason 2 the consumer price index is an imperfect measure of the cost of living |
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Term
| it is distorted by unmeasured changes in the quality of goods and services |
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Definition
| Reason 3 the consumer price index is an imperfect measure of the cost of living |
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Term
| overstates true inflation |
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Definition
| Because of measurement problems, the CPI... |
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Term
| measure the overall level of prices in the economy |
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Definition
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Term
| it includes goods and services produced rather than goods and services consumed |
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Definition
| The GDP deflator differs from the CPI because... |
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Term
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Definition
| affect the consumer price index but not the GDP deflator |
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Term
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Definition
| To compare a dollar figure from the past to a dollar figure today, the older figure should be inflated using a |
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Term
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Definition
| these are only partially indexed for inflation, unlike most other laws and private contracts |
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Term
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Definition
| usually reported; it is the rate at which the number of dollars in a savings account increases over time |
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Term
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Definition
| takes into account changes in the value of the dollar over time |
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Term
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Definition
| equals the nominal interest rate minus the rate of inflation |
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Term
| Y=(price in current year/price in base year) X 100 |
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Definition
| What is the equation for CPI? |
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Term
| Y=[(CPI in yr. 2 - CPI in yr. 1)/CPI in yr. 1] X 100 |
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Definition
| What is the equation for inflation rate in year 2? |
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Term
| producer price index (PPI) |
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Definition
| a measure of the cost of a basket of goods and services bought by firms |
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Term
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Definition
| believed to be useful in predicting changes in the CPI |
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