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MacroE Chap 8.4-8.6

terms

QuestionAnswer
Price level A measure of the average prices of goods and services in the economy.
Inflation rate The percentage increase in the price level from one year to the next.
Consumer Price Index (CPI) An average of the prices of the goods and services purchased by the typical urban family of four.
Another name for CPI cost-of-living index
Calculate Consumer Price Index (CPI) CPI = (expenditures in current yr/expenditures in base yr) X 100
Calculate Inflation Rate for a year Inflation rate = percentage increase from year to year. Not % increase from base year. Inf. Rate = (CPI last yr - CPI previous yr)X 100
Producer Price Index (PPI) An average of the prices received by producers of goods and services at all stages of the production process.
Nomminal Interest Rate The stated interest rate on a loan.
Real Interest Rate The nominal interest rate minus the inflation rate.
Deflation A decline in the price level.
Created by: ace100
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