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9 Cards in this Set

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Consumerr price index(cpi)
measure of the average of the prices paid by urban consumer for a fixed market basket of consumer goods and services (cost of living)
CPI baskt (typical market basket):
There two types and they calculate 2 CPI's. CPI-U: avg price paid by all urban households and CPI-W: avg price paid by urban wage erners and clerical workers. CPI-U is broader and we will focus more on it.
What is the consumer expenditure survey
given to select which basket is relevent
Calculating CPI, what are the 3 steps?
1. Cost of CPI basket at base price
2. Cost of CPI basket at Current price
3. Calc CPI for base and current period
What are the uses of CPI
To calculate inflation rate
Use it to deflate to real values
You can index up.
How do you calc inflation rate?
CPI current year-Cpi previous year /CPI in previous year x 100
What is deflating to real values?
Real=nomical/price index
Price index=nominal/real
What is indexing up?
Nominal=price index X real
What is the purpose in a cost of living index?
to measure changes in amount of money tha tppl would need to spend to achieve a given standard of living