ECON 104

CPI formula

(Final - initial / initial) * 100

GDP deflator formula

Nominal GDP/real GDP * 100

The best measure of prices in the US economy

GDP deflator

trade deficit

imports > exports

fiscal policy

The use of government spending and taxation to stimulate the economy

CPI

The ratio of the value of a market basket of goods and services for the typical household in one month compared to the market basket value in the (arbitrary) base period * 100

Expenditures weights

percent of a households’ budget that’s spent on a category

Core CPI

measures inflation without food and energy prices, gives a better sense of underlying inflation

measures the PRICE LEVEL for consumers

CPI

measures the PRICE LEVEL for the whole economy

GDP Deflator

three largest expenditure weights of the US CPI

housing, food, energy

rate of inflation:

(final - initial / initial) * 100

PCE (personal consumption expenditures) Price Index

a measure that doesn’t use a fixed market basket but instead uses chain weights and better adapts to changes in purchases than CPI

What is PCE used for?

By the Fed for it’s inflation goal of 2%

core inflation rate

inflation rate with the volatile factors removed

headline CPI

another name for regular CPI, that includes food and energy prices

what would cause the federal debt to grow?

federal expenditures greater than taxes

What does the symbol C stand for?

spending by households

What is the best way to describe the federal debt?

government bonds owned by those outside the government

Which is most likely if materials and supplies that firms have on hand to sell to their customers is declining across the economy?

 

production is less than final sales

What would the Fed likely do if the inflation rate was 2% and the unemployment rate was 20%?

lower the federal funds interest rate

If the economy was booming and inflation rose well above its goal of 2%, the Fed would most likely ___ the federal funds interest rate.

increase

why was the fed created in 1913?

to avert bank panic

dual mandate

the Fed’s job to minimize unemployment and maintain price stability (goal of 2% inflation rate)

what is the best description of current monetary policy?

a falling federal funds rate

If the core CPI was increasing faster than the headline (or regular) CPI, then what is most likely happening?

gas prices are falling

Nominal GDP (2026 II)

$32.5 trillion 

we do NOT use percentage change when calculating the values for this

CPI

Which period saw the greatest increases in the GDP deflator?

1990-2013

If there was deflation over a year in an expansion, which would grow the most over that year?

real GDP

Which is least likely to fall in the recessions since 1970?

The GDP deflator

If the GDP deflator had a value of 200, you could be sure that

prices had doubled since the base year

If the market basket doubled in value from one year to the next, then for sure

the inflation rate was 100%

Real GDP (2026 II)

24.3 trillion

Economic Growth (2025 II to 2026 II, annual rate)

2.1%

GDP Deflator (2026 II)

133.9

Which policy directly affects consumers?

Fiscal policy

Which policy indirectly affects consumers?

Monetary Policy

if taxes uncreased, all else equal, what would happen?

decreased sale of government bonds

Inflation rate with the GDP deflator

4.4%

CPI

334.1

Inflation rate with the CPI

3.3%

federal expenditures

$7.3 trillion (23.3% of GDP)

federal revenue (or taxes)

$5.6 trillion (17.1% of GDP)

federal deficit

$1.7 trillion (6.2% of GDP)

federal debt

$28 trillion (100% of GDP)