2020 lesson 2 post

2020 lesson 2 post - Measuring the Cost of Living Price...

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(Cost of basket in current period ) Cost in base period Measuring the Cost of Living Price Index: a series of numbers that summarize what has happened to prices over time. I. Consumer Price Index (CPI) – compares the cost of a “basket” of g/s (based on the budget of a typical urban household) in different periods. CPI = x 100 A. Procedure 1. Fix the “basket” (BLS) 2. Find prices on the g/s – there are CPIs for many different cities and regions 3. Set a base year (current base year for US = 1983) Example: Q 1990 P Total Spent 2000 P Total Spent Meals Out 36 $10 $360 $12 $432 Beer 72 $5 $360 $6 $432 Movies 24 $5 $120 $7 $168 Cost of basket $840 $1,032 1990 Base Year CPI = (1032/840) x 100 = 122.857 B. Producer Price Indices (PPI): Measure the average change over time in the selling prices received by domestic producers for their product. C. Inflation: Upward movement in the price level. % change in the price index. Ex:
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2020 lesson 2 post - Measuring the Cost of Living Price...

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