Chapter17

Chapter17 - Ch. 17: Inflation and the Price Level Inflation...

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Ch. 17: Inflation and the Price Level Inflation makes it difficult to compare past and present. It also makes it difficult to do long-term planning. We will discuss how to measure the price level and inflation using the Consumer Price Index.
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I. Measuring the Price Level with the CPI CPI: Consumer Price Index -a measure of the average of the prices paid by urban consumers for a fixed “basket” of consumer goods and services - weight of each good in basket based on surveys of family expenditures - BLS checks prices of 80,000 goods and services each month
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Calculating the CPI Item 2000 2010 Rent – 2 bedroom apt $1,000 $1,500 Clothes - 5 outfits $ 200 $ 250 Food – fixed amount $ 400 $ 470 total $1,600 $2,220
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II. Inflation – measures rate of change in average level of prices inflation rate = 100 x(CPI this year – CPI last year)/CPI last year CPI Nov. 2008 212.4 Nov. 2009 216.3 Nov. 2010 218.8
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Inflation (% change in CPI from year ago)
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*food until June 1923, thereafter based on all items. These data were calculated
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This note was uploaded on 10/24/2011 for the course ECON 3 taught by Professor Peters during the Spring '07 term at UCSD.

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Chapter17 - Ch. 17: Inflation and the Price Level Inflation...

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