Ch8notes - Prices and Inflation Prices are measured by the GDP deflator GDP deflator Nominal GDP 100 Real GDP Prices also measured by the CPI CPI

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Prices and Inflation Prices are measured by the GDP deflator 100 Real Nominal deflator × = GDP GDP GDP Prices also measured by the CPI 100 year base in basket market of Cost ar current ye in basket market of Cost × = CPI CPI attempts to answer the question: How many dollars in a given year have the same purchasing power as $100 in the base year? Basket: Typical purchases of a family of four Calculated by the Bureau of Labor Statistics
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Comparing $ Figures from Different Times Price Previous Price Current Amount Previous Amount Previous of Value s Today' × = Price Current Price Previous Amount s Today' Amount s Today' of Value Historical × =
Background image of page 2
Price Conversion Chart Year CPI 1920 20.0 1930 16.7 1940 14.0 1950 24.1 1960 29.6 1970 38.8 1980 82.4 1985 107.6 1990 130.7 1995 152.4 2000 172.2 2005 195.3 2007 207.3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Inflation Rate Annual percentage change in the price level: t t t P P P - = + 1 π Inflation in the CPI
Background image of page 4
Money and Inflation Money: the set of assets in an economy that people regularly use to make purchases. Currency: the paper bills and coins in the hands of the public. Checking Deposits: balances in bank accounts that depositors can access on demand by writing a check.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Measurement of Money MB: Monetary Base Currency in circulation Currency in bank vaults Bank deposits at FR banks M1: Currency in circulation Checking deposits M2: M1 money supply Savings deposits Small time deposits Individual money market deposits
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Quantity Theory of Money Summarizes connection between money and prices Quantity Equation t t t t Y P V M = money of velocity : GDP real
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/17/2008 for the course ECON 502.02 taught by Professor Mccafferty during the Spring '08 term at Ohio State.

Page1 / 27

Ch8notes - Prices and Inflation Prices are measured by the GDP deflator GDP deflator Nominal GDP 100 Real GDP Prices also measured by the CPI CPI

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online