ECON 203 Lecture Notes - Lecture 4: Producer Price Index, Costco, Menu Cost
13 Jul 2015
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Econ 203: principles of macroeconomics - lecture 4: inflation. Reminder: the price level is a measure of average prices of goods and services in an economy. The percentage increase in the price level from one year to the next is called the inflation rate. Two most commonly used measures of inflation: The consumer price index is a measure of the average change over time in the prices a typical urban family of four pays for the goods and services they purchase. To calculate the cpi in a given year, we need these things: The cost to purchase the basket of goods in a base year. The cpi in the current year is the cost to purchase the basket of goods this year, divided by the cost in the base year. By convention, we multiply this by 100, so that the cpi in the base year is 100.
