Term
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Definition
| a measure of the overall cost of the goods and services bought by a typical consumer. |
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Term
| How the CPI is calculated |
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Definition
1. Fix the Basket
2. Fix the Prices
3. Compute the Basket's Costs
4. Compute the Index
5. Compute the Inflation Rate |
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Term
| Inflation Rate according to CPI |
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Definition
(CPI in year 2 - CPI in year 1)/CPI in Year 1
x 100 |
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Term
| Problems in Measuring the cost of living |
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Definition
a. substitution bias
b. introduction of new goods
c. unmeasured quality change |
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Term
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Definition
CPI = Price of basket/Price of basket in base year
x 100 |
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