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Chapter 6.pdf - Chapter 6 Inflation ● Inflation is a...

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Chapter 6InflationInflation is a general rise in the prices ofgoods and services.Inflation measures changes in the cost of living.Causes includeDEMAND FACTORS: consumerconfidence, income, wealth.SUPPLY SHOCKS: price fluctuations onitems such as food and oil.GOVERNMENT POLICY: its ability toborrow and print money.Inflation is measured against a market basket. someprices rise and some fall. but overall, the price level increasesMeasuring InflationEach month, the Bureau of Labor (BLS) issues updates on inflation:1. Consumer price index (CPI) measures the retail price level.2. Producer price index (PPI) measures wholesale prices.3. GDP deflator measures the average price of all items in GDP.Disinflation: a reduction in the rate of inflation .prices rise at a decreasing pace.Deflation: a decline in the price level.prices on average fallConsumer Price IndexThe Consumer Price Index (CPI) measures theweighted average of prices of a basket of consumergoods and services, such as transportation, food andmedical careProblems With The CPICPI measures only private goods.

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Term
Spring
Professor
TARANTINO

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