CORRECTING ECONOMIC VARIABLES FOR THE EFFECTS OF INFLATION

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CORRECTING ECONOMIC VARIABLES FOR THE EFFECTS OF INFLATION The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different points in time. Now that we know how price indexes are calculated, let’s see how we might use such an index to compare a dollar figure from the […]

THE GDP DEFLATOR VERSUS THE CONSUMER PRICE INDEX

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THE GDP DEFLATOR VERSUS THE CONSUMER PRICE INDEX In the preceding chapter, we examined another measure of the overall level of prices in the economy the GDP deflator. The GDP deflator is the ratio of nominal GDP to real GDP. Because nominal GDP is current output valued at current prices and real GDP is current output valued […]

Economics Principles and Applications.

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Economics Principles and Applications. When that happens. the data gatherer goes through a four-page checklist of features such as screen size and the type of remote control to find the nearest comparable model. Once this process identifies a product that appears to be the closet match. the data gatherer notes its price. The commodity specialists back in […]

Accounting for Quality Change

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Accounting for Quality Change Behind every macroeconomic statistic’ are thousands of individual pieces of data, as well key judgment calls. An Inflation Debate Brews over Intangibles at the Mall To most people, when the price of a 27-inch television set remains $329.99 from one month to the next, the price hasn’t changed But not to Tim Lafleur. […]

PROBLEMS IN MEASURING THE COST OF LIVING

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PROBLEMS IN MEASURING THE COST OF LIVING The goal of the consumer price index is to measure changes in the cost of living. In other words, the consumer price index tries to gauge how much incomes must rise to maintain a constant standard of living The consumer price index, however, is not a perfect measure of the […]

How THE CONSUMER PRICE INDEX Is CALCULATED

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HOW THE CONSUMER PRICE INDEX IS CALCULATED When the Bureau ~f Labor Statistics calculates the consumer price index and the inflation rate, it uses data on the prices of thousands of goods and services. To see exactly how these statistics are constructed, let’s consider a simple economy in which consumers buy only two goods hot dogs and […]

Measuring the Cost of Living

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Measuring the Cost of Living In 1931, as the U.S. economy was suffering through the Great Depression, the New York Yanks paid famed baseball player Babe Ruth a salary of $80,000. At the time, this pay was extraordinary, even among the stars of baseball. According to one story, a reporter asked Ruth whether he thought it was […]