Economics (Subject) / Measuring the cost of living (Lesson)
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Measuring the cost of living
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- The Consumer prices index CPI monitor changes in the cost of living over time. When the CPI rises, a typical family has to spend more money maintain the same standard of living. The inflation rate is the percentage change in the price level from the previous period.
- CPI: a measure of the overall prices of the goods and services bought by a typical consumer. The goal of CPI is to measure changes in the cost of living, CPI tries to gauge how much incomes must rise in order to maintain a constant standard of living.
- Real interest rate nominal interest rate – inflation rate
- calculate CPI DETERMINE EXACT CONSUMPTOPM PF GOODS AND PRICE NOMINAL GDP CALCULATION CPI FORMULA= PRICE IN YEAR2/ PRICE IN YEAR1 X 100 = CPI IN EACH YEAR INFLATION RATE FORMULA= CPI IN YEAR 2- CPI IN YEAR 1 / CPI IN YEAR 1 X 100