Сh 24

GDP deflator

producer price index

consumer price index

minimum wage

consumers buy most frequently.

has experienced the greatest price increase.

has the highest price

consumers spend the largest fraction of their income on

It would be difficult to compute a price index using a simple average of all prices

Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average.

Goods differ in their importance in the average consumer's budget.

a. Some goods experience large price changes and the CPI would be too variable if computed by a simple average.

is one factor that causes the CPI to underestimate the inflation rate

is caused by the poor quality of many imported products.

is one of the primary causes of inflation.

involves consumer behaviour that helps explain why the CPI overestimates the inflation rate.

cause the CPI to overstate actual inflation.

cause the CPI to understate actual inflation.

are accounted for in the CPI.

are insignificant and thus would not affect the CPI even if accounted for

the tendency of consumers to substitute relatively cheaper goods for those that have become relatively more expensive.

political pressure from unions and retirees on the providers of a country’s official statistics to overstate the inflation rate.

the introduction of new technologies that make it easier to obtain the same standard of living.

improvements over time on the quality of products.

uses base year quantities of goods to weight prices.

uses current year quantities of goods to weight prices

is not a weighted price index

always indicates a higher rate of inflation than the GDP deflator.

increased by 15 per cent since 2000

increased by 1.5 per cent since 2000

more than doubled since 2000.

declined 15 per cent since 2000

€8.06

€8.13

€13.00

€20.80

is the amount that the consumer agrees to pay

is always the same as the nominal rate

is the percentage increase in the lender's purchasing power that results from making the loan.

decreases as the inflation rate increases

everyone benefits because money is cheaper.

everyone benefits because prices do not increase.

lenders of fixed rate mortgages generally benefit because they will make higher profits than they had calculated.

borrowers with fixed rate loans will benefit because their purchasing power will not decline as much.

helps everyone

hurts everyone.

helps creditors and harms debtors.

helps debtors and harms creditors.