Ch 8 Price Level & Inflation Flashcards
CPI formula
= (current basket price/basket price in base year) × 100
Real Wage Formula
= nominal wage/price level
If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the CPI still assumes they buy the same amount, then:
the CPI will reflect upward bias.
Yo get a pay raise and feel richer even though your raise did not keep up with inflation; this is best described as:
money illusion.
Holding nominal wages constant, if deflation is occurring in a nation, the implications of this is that :
the real wage will fall.
Price in Today’s Dollars Formula
Price in earlier time x (Price Level today/Price Level then)
The average inflation rate in the U.S. from 2000-2012 was about:
2%
The measure of how the prices included in the typical basket of goods have changed over time, holding the items in the basket constant is the concept of:
a price index.
If we want to examine how price changes affect the overall economy, the ______ is the better measure.
GDP deflator
From 1960 until 2012, the long run average rate of inflation in the U.S. was:
about 4%
