Principles of Economics- Mankiw (5th) 508

Principles of Economics- Mankiw (5th) 508 - 524 PA R T E I...

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524 PART EIGHT THE DATA OF MACROECONOMICS changes in interest rates, it will be important for us to keep in mind the distinction between real and nominal interest rates. QUICK QUIZ: Henry Ford paid his workers $5 a day in 1914. If the consumer price index was 10 in 1914 and 166 in 1999, how much was the Ford paycheck worth in 1999 dollars? CONCLUSION “A nickel ain’t worth a dime anymore,” baseball player Yogi Berra once quipped. Indeed, throughout recent history, the real values behind the nickel, the dime, and the dollar have not been stable. Persistent increases in the overall level of prices have been the norm. Such inflation reduces the purchasing power of each unit of money over time. When comparing dollar figures from different times, it is impor- tant to keep in mind that a dollar today is not the same as a dollar 20 years ago or, most likely, 20 years from now. This chapter has discussed how economists measure the overall level of prices in the economy and how they use price indexes to correct economic variables for
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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