week 2 - Bureau of Labor Statistics identifies a market...

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Econ 20 B 22:00 Chapter 23 Gross Domestic Product Y = C + I + G + NX o Consumption o Investment o Government Spending o Net Export Nominal GDP Production of goods and services valued at current prices Real GDP Production of goods and services valued at constant prices Nominal GDP/ GDP Deflator x 100 GDP Deflator A measure of the price level calculated as the ratio of nominal GDP to Real  GDP  Nominal GDP/ Real GDP x 100

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Thursday 22:00 Consumer Price Index A measure of the overall cost of the goods and services bought by a typical  consumer Bureau of Labor statistics reports the CPI each month It is used to monitor changes in the cost of living over When the CPI rises, the typical family has to spend more dollars to maintain  the same standard of living How the Consumer Price Index is Calculated 1. Fix the basket o determine what prices are most important to the typical customer

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Unformatted text preview: Bureau of Labor Statistics identifies a market basket of goods and services the typical consumer buys The BLS conducts monthly checks • 2. Find the prices o find the prices of each of the goods and services in the basket for each point in time • 3. • 4. Choose a base year and compute the index o CPI = Price of basket of goods & services / Price of basket in base year x 100 CPI Division • 42% Housing • 17% Transportation • 15% food • 6% Education • 6% Medical • 6% Recreation • 4% Apparel Thursday 22:00 • 4% Other GDP Deflator versus the CPI • Economists and policymakes monitor both the GDP delator and CPI to gauge how quickly prices are rising • There are two important differences between the indexes that can cause them to diverge 22:00...
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This note was uploaded on 04/20/2011 for the course ECON 20B taught by Professor Hymel during the Spring '08 term at UC Irvine.

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week 2 - Bureau of Labor Statistics identifies a market...

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