21 - Attempts to improve the CPI - the CPI overexaggerates...

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Attempts to improve the CPI - the CPI overexaggerates inflation .5 percent every year - PPI = producer price index - PCEPI = personal consumption expenditure price index o Draws from the CPi and the producer price index but statistically it uses chain weighted methods (the base period is not exactly held fixed but it is a moving average) - Core CPI – removes Food and Energy prices - Median CPI (looks at median prices rather than average prices, better able to deal with behavior outliers) o Median looks at the middle prices, whereas average is adding all the prices and dividing by the total number Contrastng CPI and GDP deflator - Imported consumer goods o Possible included in CPI o Definitely excluded in GDP deflator (imports are offset by consumption) o Some country’s are “borrowing inflation” - Capital goods – machine, equipment (not financial capital) o Excluded from CPI (average consumer does not by a crane) o Included in GDP deflator (if those capital goods are produce domestically [assuming that the crane you buy was not produced in Russia] - The basket o CPI uses fixed basket
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This note was uploaded on 10/23/2011 for the course ECON 002 taught by Professor Eudey during the Fall '08 term at UPenn.

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21 - Attempts to improve the CPI - the CPI overexaggerates...

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