ECON 2400 Lecture Notes - Lecture 20: Real Change, Weighted Arithmetic Mean

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amaranthhamster412

20 Apr 2017

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This might tell us something about growth in the productive capacity of the economy over time and about growth in our standard of living. A problem, however, is that the average level of prices changes over time, so that generally part of the increase in gdp that we observe is the result of inflation. In this section, we show how to adjust for this effect of inflation on the growth in gdp and, in so doing, arrive at a measure of the price level and the inflation rate. A price index is a weighted average of the prices of a set of the goods and services produced in the economy over a period of time. If the price index includes prices of all goods and services, then that price index is a measure of the general price level, or the average level of prices across goods and services.

Related Questions

The Bureau of Labor Statistics uses consumer price index to

a. monitor changes in the level of wholesale prices in the US economy.

b. monitor changes in the cost of living of people in the US over time.

c. monitor changes in the level of real GDP in the US over a period of time.

d. monitor changes in the American stock market.

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

greycoyote29

ECON 2400 Lecture Notes - Lecture 20: Real Change, Weighted Arithmetic Mean

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