chapter 7 Flashcards
(32 cards)
what do index numbers compare?
the price of an item with its base year price
what index number does the base year have?
100
what is an index number?
a percentage written without the % sign
what is the formula for index numbers?
price/ base year price x 100
what do index numbers show?
the rate of change over time
what does an index number greater than 100 show?
an increase in value
what does an index number less than 100 show?
a decrease in value
what does the RPI stand for?
Retail Price Index
what is the RPI?
shows the rate of change of prices in everyday life- mortgage payments, food, heating and petrol
when does the government use the RPI?
to set the interest rate for student loans
what does the CPI stand for?
Consumer Price Index
what does the CPI measure?
rate of price change in everyday life- does not include mortgage payments
what are updated each year in line with the CPI?
state benefits and pensions
what does the GDP stand for?
Gross Domestic Product
what is the GDP?
the value of goods and services a country produces within a stated time period
when is a country in recession?
when its GDP falls in two or more successive quarters
why is the CPI weighted?
to reflect the importance of different items in the average shopping basket
why do the CPI weightings change every year?
to reflect changes in the consumers spendings
what is the formula for weighted index number?
current weighted mean price/ base year weighted mean price x 100
what is the formula for percentage increase?
index - 100
what do chain base index numbers do?
compare price from each year with the previous year
what does the chain base index number for each year show?
that year’s percentage of the previous year’s price
formula for chain base index number?
price/ last year’s price x 100
what are the RPI and CPI?
chain base index numbers that show annual or monthly percentage changes in price
