Lesson 2: Measure inflation
Learning Objective: I can explain how inflation is measured.
How is inflation measured? Consumer price index (CPI)
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Components and the weighting of the basket are determined by surveys of households spending habits.
Problems measuring inflation...
Problems measuring inflation...
- Purchasing habits of a "typical" household will vary based on socioeconomic status and family size.
- Collecting data of a large sample size is time consuming and very costly.
- Quality of goods change over time, ex, upgrade in computer.
- Countries measure rate of inflation in different ways, thus making international comparisons are difficult.
3. Demand-pull and cost-push inflation together
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Reducing inflation:
1. Demand-side fiscal and monetary policies...
1. Demand-side fiscal and monetary policies...
- Which do you believe to be more favorable?
Activity: Read the article below and answer the corresponding questions.