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Unformatted text preview: DP Deflator and
– CPI considers the prices of foreign made consumer
– CPI doesn’t consider goods sold to firms, to
governments, or to foreigners.
– CPI is published monthly; GDP Deflator is
published quarterly. GDP deflator and CPI index in the US Why do we care about inflation ?
• During periods of inflation, not all prices and
wages rise proportionately
– inflation affects income distribution. • Inflation creates uncertainty and makes it more
difficult to make decisions.
• Higher Taxation if tax brackets are not adjusted
• If inflation is bad, is deflation good? Unemployment
Total Population (T)
~ 317 mi Working Age
~ 247 mi
Labor Force (L)
~ 155 mi People in the.Military,
in Jail, Nursing.Homes, and
People not looking for a job:
Unemployed (U) Employed (N)
~ 144 mi Participation Rate = L / WA (~ 63%)
Unemployment Rate = U / L (~ 7%) Unemployment
• The unemployment rate is not a perfect indicator of
the health of the l...
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