Gross Domestic Products

Cosumer Price Index

Tracks the cost of a group of goods a typical family buys. It shows how the cost of living changes over time.

Real Interest Rate

The interest rate that shows how much you can really buy with the interest you earn, taking inflation into account.

Real Variable

Numbers that are adjusted for inflation to show their true value, like real wages, real income, or real GDP.

Market Basket

A fixed set of goods used to calculate price indices. The goods stay the same from year to year.

Price Index

A way to measure how the cost of a fixed set of goods changes each year, like the CPI.

Base Year

A starting point for comparison in price indices. For example, the U.S. CPI uses 1983 as its base year.

Aggregate Price Level

A number that summarizes all prices in an economy, often shown by price indices.

Inflation Rate

The speed at which prices are rising. It tells you how much prices have gone up from one year to the next.

Nominal Variables

Values like wages or interest that haven't been adjusted for inflation. These are like the "sticker price."

Deflation

A decrease in the general price level of goods. It happens when the inflation rate is negative.

Purchasing Power

How much you can buy with the money you have. If prices go up, your purchasing power goes down.

Disinflation

A slowdown in the rate of inflation. Prices still rise, but not as fast as before.

Inflation

A steady increase in the overall price level in an economy, which reduces how much you can buy with your money.