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Yet Another Measurement

3. Implicit GDP Price Deflator:

Removes the effects of inflation so the overall economy in one year can be compared with another year (puts everything in the same terms)

More Measurements...

2. Producer Price Index (PPI):

Measure of change in price overtime of a specific group of goods used by businesses

Measures of Inflation

1. Consumer Price Index (CPI):

A government measure of the change in price over time of a specified group of goods and services used by the average household

Market Basket is the group of items that are priced, includes food, housing, transportation, education, etc.

Why Does Inflation Matter?

Inflation is the prolonged rise in the general price level of final goods and services

Deflation is the prolonged decline in the general price level of goods and services

Purchasing Power is the real goods and services that money can buy

  • Affected by inflation and deflation

http://www.nytimes.com/interactive/2008/05/03/business/20080403_SPENDING_GRAPHIC.html

Correcting Statistics for Inflation

Chapter 13.2

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