Chapter 6 Notes

Chapter 6 Notes - Chapter 6 Notes Price level: the average...

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Chapter 6 Notes Price level : the average level of prices in the economy > When the price level rises, the value of the dollar – its purchasing power - falls Index: a series of numbers used to track a variable’s rise or fall over time. > To calculate an index number: - value of measure in current period x 100 Value of measure in base period Consumer Price Index (CPI): an index of the cost, through time, of a fixed market basket of goods purchased by a typical household in some base period > To calculate CPI: - cost of market basket in current period x 100 Cost of market basket in July 1983 Inflation rate: the percentage change in the price level from one period to the next Deflation: a decrease in the price level from one period to the next > How the CPI is used: -As a policy target: a measure used to gauge nation’s success in achieving low inflation -To index payments: makes up for any loss of purchasing power caused by inflation
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Chapter 6 Notes - Chapter 6 Notes Price level: the average...

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