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eco 2305 summer school

Terms in this set (27)

mid point method
(B2 - B1)
(B2 + B1)/2 ÷ (A2 - A1)/(A2 + A1)/2
the inflation rate is defined as
percentage change in price level from previous period
in calculating the CPI, a fixed basket of goods and services is used. the quantities of the goods and services in the fixed basket are determined by
surveying the consumer
what basket of goods and services is used to construct the CPI
the goods and services that are typically bought by consumers as determined by government surveys
when computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year
the price
in computing the consumer price index, a base year is chosen. which of the following statements about the base year is correct
the value of the consumer price index is always 100 in the base year
one problem with the consumer price index stems from the fact that over time consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. this is called
substitution bias
a decrease in price of domestically produced nuclear reactors will be reflected in
the GDP deflator but not in the consumer price index
an increase in the price of bread produced domestically will be reflected in
both the GDP deflator and the consumer price index
inflation can be measured using either GDP deflator or price index
true
the CPI 2008 computed by dividing the cost of the basket of goods and services in 08 by the cost of the basket of goods and services in the base year then multiplying by 100
true
one of the differences between the GDP deflator and the consumer price index is
the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some good and services bought by consumers
the inflation rate in 2007 is computed by dividing (the CPI in 07 minus the CPI in 06) by the CPI in 06, then multiplying by 100
true
if the value of the consumer price index is 110 in 05 and 121 in 06 then the inflation rate is 11% in 06
false
substitution bias occurs because the CPI ignores the possibility of consumer substitution towards goods and services that have become relatively less expensive
true
the group of goods and servivces used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not
true
consumer price index
(price of basket current year/price of basket base)x100
when the consumer price index rises, the typical family
hast to spend more dollars to maintain the same standard of living
inflation
(CPI in year 2- CPI year 1/ CPI year )x100
which agency calculates the CPI
bureau of labor statistics
if the price of Italian shoes imported into the United States increases then,
the consumer price index will increase but the GDP deflator will not increase
the consumer price index is used to
monitor changes in cost of living over time
in the basket goods that are used to compute the consumer price index, the three largest categories of consumer spending are
housing, transportation, food/beverage
two alternative measures of the overall price level of prices are
the GDP deflator and the consumer price index
social security payments are
excluded from GDP because they don't reflect the economy's production
suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. in 12 the basket cost was 80; in 13 it was 84; 14 it was 87.6. the CPI was?
100 in 12
105 in 13
109.5 in 14
the price index was 120 in 2012 and 126 in 2013. what is the inflation rate of 2013
5.0%
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