Prices And Inflation

Question 1

Index number for any measure

Answer 1

Value of measure in period t / value of measure in base period

Multiplied by 100

Question 2

Consumer price index

Answer 2

Cost of market basket in period t / cost of market basket in base period

Multiplied by 100

Question 3

What does CPI include that gdp doesn’t

Answer 3

Household purchases of used goods

Household purchases of imports - Japanese cars

Question 4

What does cpi track the prices of

Answer 4

Only household purchases of goods and services

Question 5

What’s not included in cpi

Answer 5

Financial assets and homes

Question 6

Price level

Answer 6

The average level of prices in the economy

Question 7

Inflation rate

Answer 7

Percentage rate of change of the price level from one period to the next

Question 8

Inflation is equal to =

Answer 8

(Pt - Pt-1) / Pt-1

Question 9

Nominal variable

Answer 9

An economic variable measured using the current market prices that is not adjusted for changing pound values

Question 10

Real variable

Answer 10

Using prices that have been adjusted to changing values in the pound

Question 11

Real value in t=

Answer 11

Nominal value in t / price index in t

Multiplied by 100

Question 12

Nominal gdp

Answer 12

Aggregate production valued at current market price

Question 13

Real gdp

Answer 13

Aggregate production valued at constant base year prices

Question 14

Real gdp in t =

Answer 14

Nominal gdp in t / gdp deflator in t

Multiplied by 100

Question 15

Problems with gdp

Answer 15

Quality changes

Underground economy - illegal

Non market production - subsistence farming

Environmental consequences

Poverty and economic inequality

Question 16

Where does gdp work well

Answer 16

Short run performance of economy

Question 17

What does a significant change in the gdp indicate

Answer 17

Change in actual production rather than measurement problem

Question 18

WHAT DOES growth in gdp per capita correlate to

Answer 18

Increase in development