Module 15

Question 1

aggregate price level

Answer 1

overall level of prices, measured with price index

Question 2

market basket

Answer 2

hypothetical representative set of consumer purchases of goods and services, and their amounts

Question 3

price index

Answer 3

measures the cost of purchasing a given market basket in a given year, normalized so it equals 100 in base year
=cost of basket in given yr / cost in base year

Question 4

consumer price index

Answer 4

price index fro typical urban family using base period of 1982-1984

Question 5

why does the CPI overestimate inflation rate ?

Answer 5

1) CPI basket cannot adjust as quickly as individuals

2) innovation increases standard of living, widens range of choices, effectively dec prices

Question 6

producer price index

Answer 6

uses basket of goods used by producers

responds more quickly to inflation than CPI

Question 7

GDP deflator

Answer 7

nominal GDP / real GDP x 100%