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chapter 7 notes - Wealth the value of stock of assets owned...

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ECON 201 Chapter 7 notes Inflation : an increase in the general (average) price level of goods and services in the economy Consumer price Index (CPI): an index that measures change in the average prices of consumer goods and services Base year : a year chosen as a reference point for comparison with some earlier or later year CPI = (cost of market basket of products at the current-year prices) / (cost of market basket of products at base-year prices) * 100 Annual rate of inflation = (CPI in given year – CPI in previous year) / (CPI in previous year) * 100 Disinflation : a reduction in the rate of inflation Nominal income: the actually number of dollars received over a period of time Real income : the actual number of dollars received (nominal income) adjusted for changes in the CPI Real income = (nominal income) / (CPI (as decimal or CPI/100))
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Unformatted text preview: Wealth: the value of stock of assets owned at some point in time Nominal interest rate: the actual rate of interest without adjustment for the inflation rate Real interest rate: the nominal rate of interest minus the inflation rate Demand-pull inflation: a rise in the general price level resulting from an excess of total spending (demand) Cost-push inflation: an increase in the general price level resulting from an increase in the cost of production Hyperinflation: an extremely rapid rise in the general price level Wage-price spiral: a situation that occurs when increases in nominal wage rates are passed on in higher prices, which, in turn, result in even higher nominal wage rates and prices...
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