23115 Chapter Notes - Chapter 4: Xm Satellite Radio
GDP and Price Index
GDP
GDP: the market value of all final goods and services produced within a country in a given period
of time
GDP (Y): Y = C + I + G + X - M (consumption + investment + government expenditure + net
exports)
Nominal GDP: output of goods and services measured at current prices
Real GDP: output of goods and services measured at constant prices
Price Index
GDP Deflator (Price Index) = Nominal GDP / Real GDP x 100 !!!
Real Interest Rate = Nominal Interest Rate - Inflation
Price Index indicates how much prices have risen on average each year
CPI (Consumer Price Index): wighted average price of goods and services bought by consumers
CPI is not a perfect measure of consumer prices or the cost of living due to substitution bias and
the introduction of new products
CPI and Price Index relate to the level of base year prices in different ways, usually telling a similar
story
Price Index:
•Reflects the prices of all final goods and services produced domestically
•Excludes imports: price changes in imports not show up in the GDP deflator
•Current-weighted index, with a changing basket
•Compares current expenditure on currently produced goods and services to the expenditure on
the same goods and services in the base year
•The economy determines the basket
CPI:
•Reflects only the prices of all goods and services bought by consumers
•Includes imports bought by consumers
•Price changes in imports do show up in the CPI.
•Base-weighted index, with an unchanging basket
•Compares current expenditure on a fixed basket to expenditure on the same basket in the base
year
•The ABS determines the basket, updating it every four or five years.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Gdp: the market value of all nal goods and services produced within a country in a given period of time. Gdp (y): y = c + i + g + x - m (consumption + investment + government expenditure + net exports) Nominal gdp: output of goods and services measured at current prices. Real gdp: output of goods and services measured at constant prices. Gdp de ator (price index) = nominal gdp / real gdp x 100 !! Real interest rate = nominal interest rate - in ation. Price index indicates how much prices have risen on average each year. Cpi (consumer price index): wighted average price of goods and services bought by consumers. Cpi is not a perfect measure of consumer prices or the cost of living due to substitution bias and the introduction of new products. Cpi and price index relate to the level of base year prices in different ways, usually telling a similar story.
