lec17 - MACROECONOMICS Aggregate Output Employment General...

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4 MACROECONOMICS Aggregate Output Employment General Price Level 7 Government Tools Fiscal Policy Taxes Government Spending Monetary Policy Interest rates 12 Consumer Price Index CPI gives cost of market bundle in each year relative to the base year. Example: Base year is 1983. Cost of market bundle in 1994: $2568. Cost of market bundle in 1983: $1733. CPI (1994) = 2568/1733 x 100 = 1.482 x 100 = 148.2 13 201.6 2006 195.3 2005 188.9 2004 184.0 2003 179.9 2002 177.1 2001 172.2 2000 166.6 1999 163.0 1998 160.5 1997 156.9 1996 152.4 1995 148.2 1994 144.5 1993 140.3 1992 136.2 1991 130.7 1990 CPI with base of 1983 14 Inflation = Change in CPI Inflation from 2005 to 2006: 201.6 – 195.3 6.3 = = 0.032 195.3 195.3 = 3.2% inflation 17 1. CPI in base year is 100. 2. Choice of base year doesn’t matter. 3. CPI overstates effects of price changes by holding market bundle constant.
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18 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975
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This note was uploaded on 04/03/2008 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at University of California, Berkeley.

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lec17 - MACROECONOMICS Aggregate Output Employment General...

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