Defining Macro Variables -- Inflation

Defining Macro Variables -- Inflation - Econ 1021 Fall 2009...

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Defining Macro Variables: Inflation Econ 1021 Fall 2009 Outline: 1. Defining Inflation 2. Definition and comparison of various measures of inflation 3. Using price indexes 4. The costs of inflation Reading:    Chapter 5, pp. 111 – 113       from  Macroeconomics in Context
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What is Inflation? Inflation is the rate of change (the growth rate) of the average price level . What is an average price level ? just what it sounds like several ways of “averaging” the GDP Deflator the CPI -- consumer price index the PPI -- producer price index
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What is Inflation? “The Deflator” Nominal GDP 2008 = Σ (P i 2008 )(Q i 2008 ) Real GDP 2008 = Σ (P i base year )(Q i 2008 ) The (GDP) Implicit Price Deflator = “The” Average price level = P = nominal GDP / real GDP = all  goods = all  goods
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The GDP Deflator 2008 2000 GDP, current $ (billions) 14,441.4 9,817.0 GDP, constant $ (billions) 13,312.2 9,817.0 Implicit GDP
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Defining Macro Variables -- Inflation - Econ 1021 Fall 2009...

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