Week 2 Intro To Economics

Inflation (definition)

a raise in prices associated with major disruptive events, such as covid 19

CPI (Consumer Price Inflation, defined)

reflecting the cost to the basket of an average consumer, disregarding luxury purchases such as diamonds/birkens etc.

Deflation (defined)

a general fall in prices

Disinflation

a slowdown in the rate of inflation

Base year

prices are used as constant prices in equations and formulas, take note of this

GDP Deflator (formula)

nominal GDP / real GDP

Inflation rate (defined)

the growth rate of the GDP deflator, how much it changes

Hyperinflation

50% increase in prices

CPI (Formula)

cost of the basket in year t / cost of the basket in base year *100 (multiply 100 for percent)

Inflation Rate (formula)

CPI t - CPI t-1 / CPI t-1

Nominal → Real (wage formula)

Real wage = Nominal wage / CPI *100

CAGR (Compound Annual Growth Rate Formula)

g = ( yt / y0 )^1/t - 1

Recession

output and income fall month after month, resulting in negative outcomes

Imports

goods/services from other countries

Exports

goods/services produced within a country

GDP (formula)

C + I + II + G + (X-M) [← net export]