Gdp chained 2005 prices 100 100 2000 2001 2002 2003

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: for 2005? = [2005 GDP (current, 2005 prices)/ 2005 GDP (Chained, 2005 prices)] * 100 = 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ** Subtract IGDPDI (2010) from IGDPDI(2011) to get inflation between 2010 and 2011. ANOTHER Measure of Inflation: The Consumer Price Index • The consumer price index (CPI) is a price index computed each month by The Bureau of Labor Statistics using a bundle that is meant to represent the “market basket” purchased monthly by the typical urban consumer. • It’s the most popular fixed-weight price index. • The CPI market basket shows how a typical consumer divides his or her money among various goods and services. FIGURE 7.1 The CPI Market Basket Percentage Change in CPI 1.3 7.9 1.9 0.8 0.7 −0.4 1.5 3.3 2.8 0.7 1.7 1.0 1.0 1.3 1.3 1.6 2.9 3.1 4.2 5.5 CPI 24.1 26.0 26.5 26.7 26.9 26.8 27.2 28.1 28.9 29.1 29.6 29.9 30.2 30.6 31.0 31.5 32.4 33.4 34.8 36.7 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 TABLE 7.5 The CPI, 1950–2009 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Note: 1982-1984=100 Percentage Change in CPI 5.7 4.4 3.2 6.2 11.0 9.1 5.8 6.5 7.6 11.3 13.5 10.3 6.2 3.2 4.3 3.6 1.9 3.6 4.1 4.8 CPI 38.8 40.5 41.8 44.4 49.3 53.8 56.9 60.6 72.6 65.2 82.4 90.9 96.5 99.6 103.9 107.6 109.6 113.6 118.3 124.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Percentage Change in CPI 5.4 4.2 3.0 3.0 2.6 2.8 3.0 2.3 1.6 2.2 3.4 2.8 1.6 2.3 2.7 3.4 3.2 2.8 3.9 -0.4 CPI 130.7 136.2 140.3 144.5 148.2 152.4 156.9 160.5 163.0 166.6 172.2 177.1 179.9 184.0 188.9 195.3 201.6 207.3 215.3 214.5 • • The BLS “Inflation Calculator” About the CPI inflation calculator: http://www.bls.gov/ The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used. How to calculate CPI? • Suppose you want to calculate CPI for 2012. • Pick a base year – say 2010, and a ‘bundle’ x2010 ; y2010 with associated prices Px ( 2010 ) ; Py ( 2010 ) Cost of Base year bundle = Px ( 2010 ) X 2010 Py ( 2010 )Y2010 Px ( 2012 ) X 2010 Py ( 2012 )Y2010 * 100 Cost of 2010 bundle at 2012 prices = Px ( 2012 ) X 2010 Py ( 2012 )Y2010 CPI (2012) = Px ( 2010 ) X 2010 Py ( 2010 )Y2010 • • • • • IGDPDI or CPI? Both measure price changes (inflation or deflation). IGDPDI is broader than CPI (economy wide prices / good not just consumer goods in urban areas). CPI uses base year bundle while IGDPDI uses base year prices. CPI overestimates inflation, IGDPDI underestimates inflation. [opposite for deflation – CPI underestimates deflation; IGDPDI overestimates deflation]. Summary: Price Level Changes • Relates...
View Full Document

This note was uploaded on 10/01/2013 for the course ECON 1120 taught by Professor Wissink during the Spring '05 term at Cornell University (Engineering School).

Ask a homework question - tutors are online