Presentation is loading. Please wait.
Published byPreston Newman Modified over 7 years ago
Module 15 Mar 2015
Aggregate price level – a measure of the overall level of prices in the economy Market basket – a hypothetical set of consumer purchases of goods and services Consumption bundle – typical basket of g & s purchased before the price changes ◦ Suppose we’re looking at citrus ◦ Pre-frost O =.20, G =.60, L =.25 ◦ Qty 200 O, 50 G, 100 L ◦ Total cost is $95.00
Post – frost ◦ O =.40, G = 1.0, L =.45 ◦ Qty same ◦ Total cost of market basket is $175.00 Price Index – measures the cost of purchasing a given market basket in a given year. The index value is normalized so that it is equal to 100 in the selected year. Price Index in a given year = Cost of MB in a given year x 100 Cost of MB in base year
Inflation rate = Price index in year 2 – Price index in year 1 x 100 Price Index in year 1 Consumer price index (CPI) – measures the cost of the market basket of a typical urban American family Today’s CPI is based on the years 1982-1984 (yay – that’s when I was in high school)
Housing 43% Food and beverage 16% Transportation 12% Medical Care 6% Recreation 6% Education and Communication 6% Apparel 4% Motor Fuel 3% Other g & s 3%
Producer Price Index (PPI) – measures changes in the prices of g & s purchased by producers GDP deflator – for a given year is 100 times the ratio of nominal GDP to real GDP in that year.
© 2023 SlidePlayer.com Inc.
All rights reserved.