ECON 261 Chapter Notes - Chapter 11: Nominal Interest Rate, Real Interest Rate, Gdp Deflator
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The consumer price index: consumer price index (cpi)= measure"s the typical consumer"s cost of living, the basis of cost of living adjustments (colas) in the many contracts and in. Let"s consider a simple economy in which consumers only buy 2 goods: hot dogs and hamburgers. 5 steps: (determines how quickly the cost of living for the typical consumer is rising: step 1: fix the basket: determine which prices are most important to the typical consumer. The bls surveys consumers to determine what"s in the typical consumer"s shopping basket. Cpi : ex: 2013 is the base year. In this year, the basket of hot dogs and hamburgers costs . Therefore, to calculate cpi, the price of the basket in each year is divided by and multiplied by. This means that the price of the basket in 2014 is 175% of its price in the base year.