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## REAL AND NOMINAL INTEREST RATES

REAL AND NOMINAL INTEREST RATES Correcting economic variables for the effects of inflation is particularly important, and somewhat tricky, when we look at data on interest rates. The very concept of an interest rate necessarily involves comparing amounts of money at...

## INDEXATION

INDEXATION As we have just seen, price indexes are used to correct for the effects of inflation when comparing dollar figures from different times. This type of correction shows up in many places in the economy When some dollar amount is automatically corrected for...

## MR. INDEX GOES TO HOLLYWOOD

MR. INDEX GOES TO HOLLYWOOD What was the most popular movie of all time? The answer might surprise you Movie-popularity is by box office receipts. By that measure, Titanic is the number  movie of all time,. followed by Star Wars, Shrek IL and E. T. But this ranking...

## DOLLAR FIGURES FROM DIFFERENT TIMES

DOLLAR FIGURES FROM DIFFERENT TIMES We first return to the issue of Babe Ruth’s salary. Was his salary of \$80,000 in 1931 high or low compared to the salaries of today’s players To answer this question, we need to know the level of prices in 1931 and the...

## CORRECTING ECONOMIC VARIABLES FOR THE EFFECTS OF INFLATION

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...

## THE GDP DEFLATOR VERSUS THE CONSUMER PRICE INDEX

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...