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8 Cards in this Set

  • Front
  • Back
why CPI isn't the perfect way to measure standard of living
1.substitution bias
2. introduction of new goods
3. unmeasured quality change
Inflation Rate calculation
CPI2-CPI1/CPI1 x 100
or
GDP deflator
GDP deflator
Nominal GDP/Real GDP x 100
CPI
consumer price index
Price of current basket/Price of base yr basket x 100
REAL INTEREST RATE
nominal interest rate - inflation rate
GDP deflator vs CPI
GDP only records products produced domestically
CPI are all bought by TYPICAL consumers.

CPI basket is FIXED
GDP measures "currently produced" GS
Indexation
when an amt is automatically corrected for changes in price level
productivity
quantiy of GS produced for each unit of output

determines productivity