Chapter 11 - Measuring the Cost of Living

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Macroeconomics

GDP

Inflation rate

the percentage change in the price index from the preceding period.

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GDP deflator

measure of the overall level of prices in the economy.

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Producer price index

a measure of the cost of a basket of goods and services bought by firms.

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overall level of prices

The purpose of measuring the ________ in the economy is to allow us to compare dollar figures from different times.

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Consumer price index (CPI)

a measure of the overall cost of the goods and services bought by a typical consumer.

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Substitution bias

when the price change from one year to the next, changes disproportionately

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