Suppose the price index was 105 in 2007, 115.5 in 2008, and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008. This means that
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the price index in 2009 was lower than 127.05.
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An increase in the price of bread produced domestically will be reflected in
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both the GDP deflator and the consumer price index.
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If the nominal interest rate is 1.5 percent and the rate of inflation is -0.5 percent, then the real interest rate is
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2 percent
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The inflation rate you are likely to hear on the nightly news is calculated from
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the CPI
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By not taking into account the possibility of consumer substitution, the CPI
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overstates the cost of living.
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Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is
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$112,711.86
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A COLA automatically raises the wage when
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the consumer price index increases.
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The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn.
If 2009 is the base year, then the CPI for 2008 was
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74.5
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The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
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Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate
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If 2006 is the base year, then the CPI for 2006 was
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100
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