ECO 1102 Lecture Notes - Lecture 3: Canada Pension Plan, Old Age Security, Gdp Deflator

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The level of prices in an economy - the cost of living. If both income and prices double than purchasing power does not change so we are no better of. Purchasing power changes at different speeds from place to place and over time. Affects consumption decisions, the real value of debt and where you take a job. The producer price index is used to measure the prices of goods and services purchased by firms. Cpi one measure of the price level in the economy. Changes in it provide one measure of inflation. Used to compare dollar figures at different points in time. Cpi is the basis for the cost of living (colas) adjustments in. Many government programs such as the canada pension plan (cpp) and the old age security (oas) program. Various income tax parameters such as the basic personal amount. Will examine problems with cpi and how the cpi compares with the gdp deflator.

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There are many different types of market baskets that economists measure. For example, the market basket for consumers called the 'Consumer Price Index' tracks the prices associated with the typical consumer's purchases of goods and services. The 'Producer Price Index' tracks the prices that firms receive when selling their goods and services.

Indicate the appropriate market basket to use in each of the following instances.

Consumer Price Index:

a)	Measuring differences in the cost of living between different cities.
b)	Examining price changes that might affect businesses.
c)	Measuring the cost of living for a typical consumer.

Producer Price Index:

A)	Measuring differences in the cost of living between different cities.
B)	Examining price changes that might affect businesses.
C)	Measuring the cost of living for a typical consumer.

amaranthbuffalo689

Which of the following statements is true about the consumer price index (cpi):

A.It measures cost of representative basket of goods at the level of first significant commercial transaction

B.It measure of the average prices paid by consumers for all goods and services

C.It is used to measure the standard of living in an economy

D.It measures the average prices paid by consumers for a fixed basket of goods services

E. None of the above

beigebee838

1. The peak of the business cycle

a. usually occurs when the natural rate of unemployment is equal to its actual rate.

b. is the point where an expansion ends and a recession begins

c. is the minimum level of nominal GDP.

2. The consumer price index (CPI) reflects

a. the median annual expenditures of a typical single family of four on consumer goods

b. the average price of all goods and services computed from the ratio of nominal GDP to real GDP.

c. the changes in the prices of goods and services typically purchased by consumers.

3. The Consumer Price Index is NOT used

a. to measure the average price level of all final goods and services produced

b. to compute the U.S. inflation rate.

c. to measure changes in the cost of living

4. Which of the following is true of a price index that uses a fixed market basket?

a. It excludes new goods and services

b. It accurately predicts the impact of rising prices when purchases are made at superstores.

c. It overstates the importance of items that fall in price.

5. A quality-change bias in the construction of the CPI arises because

a. big box stores that carry electronic goods routinely run sales to reduce their inventories before stocking new models.

b. consumers also shop at superstores or outlet stores

c. newer versions of a product might be more expensive but could also be better than the older version.

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ECO 1102 Lecture Notes - Lecture 3: Canada Pension Plan, Old Age Security, Gdp Deflator

ECO 1102 Full Course Notes

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