Price Index and Real Interest Rate

Price Index

Measure of average price changes in a specific set of goods and services

Nominal Interest Rate

Interest rate stated on a loan contract

Depreciation

Decrease in value of an asset over time

Real Interest Rate

Difference between the nominal interest rate and the inflation rate

Producer Price Index (PPI)

Price index that focuses on price changes for producers

GDP Deflator

Price index that measures changes in prices of all goods and services included in GDP

Consumer Price Index (CPI)

Price index that tracks price changes in housing, food, and apparel

Inflation Rate

Rate at which general level of prices for goods and services is rising

Frictional Inflation Rate

Rate of inflation caused by factors such as supply chain disruptions or labor market inefficiencies

Structural Inflation Rate

Rate of inflation caused by long-term changes in the structure of an economy

Base Year

Reference year used for comparison in a price index

Gross Domestic Product (GDP)

Total value of goods and services produced within a country