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Unformatted text preview: A price index computed each month by the Bureau of Labor Statistics using a bundle that is meant to represent the "market basket" purchased monthly by the typical urban consumer • Producer Price Index: Measures of prices that producers receive for products at all stages in the production process • Price Index = (Cost in Year 2 / Cost in Base Year) (100) • Purchasing Power of $1 in Year 2 compared to Purchasing Power of $1 in Year 1 • Value in Year 2 = (Purchase Cost in Year 1 / Purchase Cost in Year 2) (100) Unaticipated Inflation • Inflation Losers: o Luxury Item sellers o Consumers whose real income declined o Normal Goods sellers o Lenders with fixed interest rate contracts o Widows, orphans, retirees on fixed incomes...
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- Spring '99
- Inflation, Consumer price index, general price level, unemployment rate Inflation, inflation Major Price