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CPI formula

(value of basket current year/value of basket base year) x 100 (Base year = 100)

value in the later year minus the value in the earlier year divided by the value in the earlier year and multiplied by 100.

A percentage change in a value equals the:

the difference between real and nominal income.

Any salary that is rising slower than the rate of inflation is actually falling, in real terms. This statement refers to

CPI groups

Food beverage, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services

decreases

For anyone receiving an annuity or any other fixed payment over time such as a pension, inflation (increases/decreases) purchasing power and can have important consequences. (Please choose your answer from the options given in the brackets.

base year

In computing the Consumer Price Index, the reference year is also known as the

Inflation rate formula

Inflation rate year = CPI year 1 - CPI year t-1/ CPI year t-1 * 100

transportation and food and beverage

The CPI consumption categories that account for the second and third largest proportions of consumer spending are:

Housing

The CPI consumption category that accounts for the largest proportion of consumer spending is

average

The CPI is constructed using the goods and services purchased by the _______ household.

Month

The U.S. Bureau of Labor Statistics also collects information on prices every ________ to compute the consumer price index

large variation in the individual price indexes for these consumption categories.

The U.S. Bureau of Labor Statistics provides additional price indexes across many different types of goods and services. Typically there is a:

Real income

The amount of goods and services that can be purchased with nominal income; the inflation adjusted measure of income The measure of the purchasing power of what you earn every month is: Real income = Nominal income/ Consumer Price index * 100

value of the CPI in the later year minus the value of the CPI in the earlier year divided by the value of the CPI in the earlier year and multiplied by 100.

The inflation rate equals the:

Minus

The percentage change in real income is approximately the percentage change in nominal income (plus/minus) the percentage change in prices.

True

The price of a good is a measure of how much money it takes to buy that good. T/F

None

Vegetables are purchased by a restaurant. Which major group of the CPI does this purchase belong to?

You must pay this tax based on the nominal change in value.

When you sell a stock, you must pay taxes on the gain in value. Why?

Nominal

When you sell a stock, you must pay taxes on the gain in value. You must pay this tax based on the _______ change in value

Inflation

a general increase in the prices of goods and services results in a reduction in someone's ability to buy goods and services.

Producer price index PPI

a price index that measure the average change over time in the selling prices received by producers of good and services

Hyperinflation

a situation in which inflation rate is positive and greater than 50% per month

Deflation

a situation in which the inflation rate is negative

Disinflation

a situation in which the inflation rate is positive but declining over time

Consumer price index (CPI)

an economic indicator used to measure over time the average price of a market basket of goods and services purchased by the typical consumer

real

earnings decreased for those having only a high school education or less.

From 1979 to 2019, real earnings decreased for those having only a high school education or less. Among the possible explanations for this trend offered by economists are:

globalization has helped those with greater education more than those with less education. technological change occurring in recent decades has increased the demand for people with more education.

Causes of inflation

increase the money supply increase in aggregate demand decreases in someone's ability to buy goods and services

nominal income

the actual number of dollars received in exchange for the different resources availability in the economy is the number of dollars you receive for your labor.

inflation rate

the percentage change in the overall price of goods and services in the economy from one time period to another