AP Macro Unit 2

consumer price index

The change over time of the weighted prices of a particular group of goods and services

who would benefit from unanticipated inflation

borrowers

if actual inflation rate is greater than the expected rate borrowers…

of variable interst rate loans will be better off

CPI is criticized for…

Overstating the true burden of inflation because it does not recognize consumers ability to substitute goods and services as price change

A continuous increase in CPI is

Inflation

why doesn’t the CPI measure the true cost of inflation

improvements in the quality of goods or services are not fully reflected

CPI

consitsts of a market basket of hundreds of goods and services

Deflation

a falling overall price level

Disinflation

the process of bringing the price level down 

to be unemployed

out of work, willing to work, must be able to work, actively seeking a job

Misleading statistic

discouraged workers/hidden employment, no longer seeking a job

Natural rate

full employment 

Natural rate =

frictional + structural employment

grant labor supplied=

grant labor demand

Frictional Unemployment 

between jobs, in-between college and highschool

Structural

mismatch between job qualifications, work skills or demand is down, lack of skills or education, structurally unemployed

Cyclical

most sever, economy is down, workers laid off, not buying many goods or services

Hurt

the group or person is hurt my unanticipated inflation

Gain

means the person or group is gains from unanticipated inflation