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Transcript of Inflation 13.2
Correcting Statistics for Inflation
Why Does Inflation Matter?
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
2. Producer Price Index (PPI):
Measure of change in price overtime of a specific group of goods used by businesses
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)
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
Market Basket is the group of items that are priced, includes food, housing, transportation, education, etc.