Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
12 Cards in this Set
- Front
- Back
Inflation |
Is a general and ongoing rise in the level of price in an entire economy |
|
Relative price change |
Occurs when you see the tuition price went up but the price of laptops has gone down. |
|
The annual rate of inflation calculation |
{(level in New year -- level in past year) / level in past year} *100 = % change |
|
Converting basket goods to an index |
(any year / the base year) * 100 = index % |
|
Consumer Price index (CPI) |
Is based on the prices in a fixed basket of goods and services that represents the purchases of the average family of 4 |
|
Substitution bias |
The rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living. Because it does NOT account for the consumer subsidizing away from the more expensive good |
|
The quality/new goods bias |
means that the rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, because it does not account for the improvements in the quality of existing goods or the invention of new goods improves the standard of living. |
|
Core inflation index |
By taking the CPI and excluding volatile economic variables, and this way, economist have a better sense of the underlying trends in prices that affect the cost of living |
|
Producer Price index (PPI) |
Based on prices paid for supplies and inputs by producers of goods and services. /// Telling if going inflation or deflation |
|
Internal Price index (IPI) |
Based on the prices of merchandise that is exported or imported |
|
Employment cost index |
Measures wage of inflation in the labor market |
|
GDP deflator index |
Is the index that includes all the GDP components consumption + investment + government + ( exports - imports) = ANSWER /// and is all the final goods and services produced within a year's border. This is recalculated every year. |