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ECON 13 Lecture Notes - Lecture 5: Producer Price Index, Gdp Deflator, Deflation

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School
UC-Irvine
Department
Economics
Course
ECON 13
Professor
George Sarraf

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ECON 13 Full Course Notes
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Document Summary

Inflation rise in the level of prices in the economy: expressed by a positive increase in the inflation rate. Deflation decrease in the general price level of goods and services: occurs when the inflation rate falls below 0% (a negative inflation rate) The changing price of a basket of goods. The price level is measured by using a basket of goods and services and calculating how the total cost of buying that basket of goods will increase over time. The rate of inflation is measured as the percentage change between price levels over time. The most commonly cited measure of inflation is the consumer price index (cpi) which is based on a basket of goods representing what the typical consumer buys. Measured the typical consumer"s cost of living. The basis of cost of living adjustments (colas) in many contracts and in social. Different measured of inflation are based on different baskets of goods.

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Related Questions

a) Assuming that money market equilibrium always exists, if the national price level P increases by 5%, and real money demand L increases by 2%, then the nominal money supply M needs to increase by:

a. decrease by 7%.

b. decrease by 3%.

c. increase by 7%.

d. increase by 3%.

b) A real depreciation of the dollar against the euro occurs when:

a. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the US inflation rate, regardless of the European rate of inflation.

b. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the sum of the US inflation rate and the European inflation rate.

c. the cost of the US basket in terms of the European basket (European basket per US basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.

d. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the European inflation rate, regardless of the US rate of inflation.

e. the cost of the European basket in terms of the US basket (US basket per European basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.

The average price of goods and services in the economy is also known as:

a. the price level.

b. inflation rate.

c. am market basket.

d. the cost of living

The average price of goods and services in the economy is also known as

A) the cost of living.

B) the price level.

C) the inflation rate

D) a market basket.