ECON 224 Final Study Guide.docx

# ECON 224 Final Study Guide.docx - ECON 224 Final Study...

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ECON 224 Final Study Guide Nominal Interest Rate: The interest rate usually reported and not corrected for inflation Real Interest Rare: Nominal interest rate that is corrected for the effects of inflation Equals the nominal interest rate minus the rate of inflation Consumer price index: Imperfect measure of the cost of living for substitution bias, the introduction of new goods, and unmesured changes in quality Reflects the prices of goods and services bought domestically Uses a fixed basket of goods VArious laws and private contacts use price indexes to correct the effects of inflation GDP Deflator: Nominal GDP X 100 Real GDP Differs from CPI because it includes goods and services produced rther than goods and services consumed Reflects the prices of all goods and services produced domestically Automatically changes the group of goods and services over time as the compostion of GDP changes Assignment #8 Ch. 16 Measuring the Cost of Living 1. The CPI is a measure of the overall cost of the goods and services bought by: - A typical consumer, and the CPI is computed and reported by the Department of the Treasury 2. The Steps involved in calculating the consumer price index and the inflation rate in order as it follows: - Fix the basket, find the prices, compute the basket’s cost, choose a base year and compute the index, and compute the inflation ra te. 3. What basket of goods and services is used to construct the CPI -The goods and services that re typically bought by consumers as determined by the government surveys

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11. Refer to Table 24-1. If 2005 is the base year, then the inflation rate in 2006 was

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• Fall '16
• McKeever,R
• Inflation, Consumer price index

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