Created by jackexamtime
almost 11 years ago
|
||
Copied by eleanor.adamandi
almost 11 years ago
|
||
InflationInflation is defined as the steady and persistent rise in the general level of prices and a reduction in the purchasing power of money
Inflation is calculated using a COMPOSITE PRICE INDEX
Constructing a Composite Price Index
There are several steps in this process:Step 1: Choose a base yearStep 2: Decide which goods to includeStep 3: Find the price of the goodsStep 4: Calculate a SIMPLE PRICE INDEX for each good (New Price/Base Year Price x 100)Step 5: Find the weigh of each item (this is the percentage of income spent on each good)Step 6: Multiply each index number by its weight
Example Composite Price Index
Introduction to Inflation
Want to create your own Notes for free with GoConqr? Learn more.