Lecture2 - ECON1002 Introductory Macroeconomics 1 Lecture...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ECON1002 Introductory Macroeconomics 1 Lecture 2: Measuring Macroeconomic Performance At the end of this lecture, you should be able to answer the following questions: How is the CPI (and inflation) calculated? What are the economic costs of inflation? Do I understand the distinction between the nominal and real rate of interest? Why do people save? What is the link between savings and wealth? What is national saving and how is it related to Investment? ECON1002 Introductory Macroeconomics 2 The Consumer Price Index (CPI): average price of a basket of goods and services consumed by a typical family The CPI is typically used to calculate the increase (or decrease) in prices (known as the rate of inflation) over some particular period. Measures of the price level ECON1002 Introductory Macroeconomics 3 The CPI measures changes in the price of a basket of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). The Consumer Price Index Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0? Mar Qtr 2010 to Jun Qtr 2010 Jun Qtr 2009 to Jun Qtr 2010 Weighted average of eight capital cities % change % change Food -0.3 1.4 Alcohol and tobacco 5.9 8.7 Clothing and footwear 0.0-3.8 Housing 0.6 5.8 Household contents and services 0.9 0.2 Health 2.2 5.0 Transportation 0.7 3.2 Communication -0.1-0.2 Recreation -1.8-0.6 Education 0.0 5.7 Financial and insurance services 0.2 3.9 All groups 0.6 3.1 ECON1002 Introductory Macroeconomics 4 Suppose a family needed an average of $166 a day to survive in Dec 2008. This family would need $169.50 a day to survive in Dec 2009. This assumes (i) expenditure weights unchanged and (ii) quality unchanged The Consumer Price Index 2008 CPI Mar 162.2 Jun 164.6 Sep 166.5 Dec 166.0 2009 CPI Mar 166.2 Jun 167.0 Sep 168.6 Dec 169.5 ECON1002 Introductory Macroeconomics 5 The CPI and Inflation Inflation is typically measured as the rate of change in the CPI. Quarterly inflation = e.g. Four quarter-ended inflation, e.g. = 100(%) Jun Mar Mar CPI CPI CPI- 2009, 2008, 2008, 100(%) Dec Dec Dec CPI CPI CPI- ECON1002 Introductory Macroeconomics 6 Australias Inflation Experience The Great Inflation GST The CPI and Inflation Mar-1963 Mar-1968 Mar-1973 Mar-1978 Mar-1983 Mar-1988 Mar-1993 Mar-1998 Mar-2003 Mar-2008 18 16 14 12 10 8 6 4 2-2 CPI Inflation: 1960-2008 % per annum Data source: DX, ABS ECON1002 Introductory Macroeconomics 7 Headline vs Underlying Inflation Source: RBA What is underlying inflation and what is headline inflation? ECON1002 Introductory Macroeconomics 8 The CPI and GDP deflator The GDP deflator measures the average price of output produced , while the consumer price index (CPI) measures the average price of consumption, or equivalently, the cost of living ....
View Full Document

This note was uploaded on 08/18/2011 for the course ECON 1002 taught by Professor Markmelatos during the Three '10 term at University of Sydney.

Page1 / 37

Lecture2 - ECON1002 Introductory Macroeconomics 1 Lecture...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online