Chapter 6 - Chapter 6: Measuring the Price Level and...

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Chapter 6: Measuring the Price Level and Inflation Consumer Price Index (CPI) – for any period, measures the cost in that period of a standard basket of G/S relative to the cost of the same basket of G/S in a fixed year called base year Price Index – measure of the average price of a given class of G/S relative to the price of the same G/S in a base year Rate of Inflation – the annual % rate of change in the price level as measured by the CPI Deflation – a situation in which the prices of most G/S are falling over time so that inflation is negative Nominal Quantity – a quantity that is measured in terms of its current dollar value Real quantity – a quantity that is measured in constant dollar terms Deflating – nominal price / price index to express the quantity in real terms Real wage – the wage paid to workers measured in terms of real purchasing power Indexing – the practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index; indexing prevents the purchasing power of the nominal quantity from being eroded by inflation Nominal interest rate – the type of interest rate you usually encounter in everyday life – the price paid per dollar borrowed per year Real Interest Rate – nominal interest rate – inflation rate Price Level – overall level of prices at a point in time as measured by a price index such as the CPI Relative Price – price of a specific G/S in comparison to the prices of other G/S
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This note was uploaded on 04/18/2008 for the course ECON 102 taught by Professor Lemche during the Spring '08 term at The University of British Columbia.

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Chapter 6 - Chapter 6: Measuring the Price Level and...

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