Chapter 9 Flashcards
0
Q
What are the four steps to calculate price index?
A
- Choose goods and services to be included in the market basket.
- Determine the cost of the goods and services in the market basket at the base period.
- Determine the cost of the market basket in the current period.
- Divide the current cost of market basket by the base period cost of market basket.
1
Q
What is price index?
A
It is a number that’s movement represents changes in the average prices of goods and services.
2
Q
What is consumer price index?
A
This is the price index that’s movement represents the average prices of goods and services typically purchased by consumers. This is usually used to calculate the cost of living and it is a good indicator of price level.
