2/14 lecture

Question 1

how to you convert nominal to real GDP

Answer 1

through GDP deflator

Question 2

do things get more expensive in nominal or real form

Answer 2

nominal

Question 3

price level theory is

Answer 3

a hypothetical number representing an economy’s overall level of nominal forces at a particular point in time

Question 4

price index is

Answer 4

the nominal price of an actual basket of goods and servives at a particular point in time

Question 5

example of price index is

Answer 5

GDP delfator

Question 6

price index serves as a practivally viable measuer of the

Answer 6

price level

Question 7

while the price level is interesting we are more interested in how

Answer 7

levels change over the course of time

Question 8

inflation

Answer 8

growth of price level

Question 9

hyperinflation

Answer 9

high rates of inflation (fast increase in price levels)

Question 10

disinflation

Answer 10

a decrease in rate of inflation

Question 11

deflation

Answer 11

negative growth of price level (negative rate)

Question 12

stagflation

Answer 12

joint observation of high inflation and high unemplyment

Question 13

when did deflation occur historically

Answer 13

great depression and great recession

Question 14

what are weights

Answer 14

The weights are meant to reflect the relative importance of the goods and services as measured by their shares in the total consumption of households. The weight attached to each good or service determines the impact that its price change will have on the overall index.

Question 15

what are the four measures of inflation

Answer 15

HH: CPI vs PCE
Firms: PPI vs GDPD

Question 16

what is CPI (consumer price index)

Answer 16

the price of a weighted average market basket of consumer goods and services purchased by households.

Question 17

what is PCE (personal consumption expenditure index)

Answer 17

consumer centric weights that are updated annually

measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

Question 18

what is producer price index

Answer 18

include intermediate inputs

A producer price index is a price index that measures the average changes in prices received by domestic producers for their output.

Question 19

what is GDP deflator

Answer 19

measures the changes in prices for all of the goods and services produced in an economy.

Question 20

why is it a bad idea ot find real growth with CPI

Answer 20

because you need to look at furms

Question 21

what does real growth capture

Answer 21

change in price

Question 22

what does nominal GDP account for

Answer 22

change in price and quantities

Question 23

what do many people argue about infaltion

Answer 23

that it represents a silent tax or theft (a lot of negativity around infaltion)

Question 24

monetarist view on inflation

Answer 24

inflation is always and everywhere a monetary phenomenon (fed is responsible)

Question 25

fiscal view on inflation

Answer 25

executive deficits can lead to deterioration (treasury is responsible)

Question 26

what are the two reasons for regulation around inflation

Answer 26

real and banking

Question 27

real for inflation is

Answer 27

cash, banks deposits (can be sed by HH, F)

Question 28

banking for inflation is

Answer 28

vault cash, reserves (cannot be used by HH or firms)

Question 29

what is the federal reserve

Answer 29

the central bank responsible for managing the currency and monetary policy in the US

Question 30

what does the fed want to do

Answer 30

keep prices stable

Question 31

what is the dual mandate

Answer 31

promote goals of max employment, stable oprices, and moderate long term interest rates

Question 32

what inflation rate does the FED aim for

Answer 32

2% over the long run

Question 33

what are the cons of inflation

Answer 33

less purchasing power and makes planning difficult

Question 34

pros of inflation

Answer 34

avoid recession which is why we aim for positive inflation. want buffer between deflation

Question 35

why is recession bad

Answer 35

fall in prices, money gains purchasing power, but by sitting on money it gains value so people are spending less money and point of money is to spend it. so during recession money loses its function

Question 36

after the great inflation who brought prices back down

Answer 36

paul Volcker (Volcker disinflation)

Question 37

price index is

Answer 37

a practical measure of the previous level of prices