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Aggregate output - The Other Major Macroeconomic Variables - The inflation rate

Q: What equals the rate of change in the GDP deflator?

The rate of inflation. The rate of change in the GDP deflator equals the rate of inflation: π1=(Pt-Pt-1) / P(t-1) zie afbeelding

Q: What's the difference between the GDP deflator and consumer price index (CPI)?

The GDP deflator measures the average price of output , while the consumer price index, or CPI , measures the average price of consumption , or equivalently, the cost of living.

Q: What is the consumer price index (CPI)?

The CPI gives the cost in dollars of a specific list of goods and services over time , which attempts to represent the consumption basket of a typical urban consumer.

Q: For which 2 reasons is the set of goods produced in the economy not the same as the set of goods purchased by consumers?

Some of the goods are sold to firms , to the government or to foreigners . Some of the goods are not produced domestically but are imported from abroad .

6 important questions on Aggregate output - The Other Major Macroeconomic Variables - The inflation rate

What is the GDP deflator?

The GDP deflator in year t, Pt, is defined as the ratio of nominal GDP to real GDP in year t:
Pt=Nominal GDPt / Real GDPt = €Yt / Yt

In Nederlands bbp-deflator. Wat anders dan consumentprijsindex -> De bbp-deflator is een onderschatting van de inflatie en de CPI is een overschatting. Waar de bbp-deflator de prijswijzigingen weergeeft in het bbp, wordt de inflatie door middel van CPI opgemeten door voor een korf van enkele honderden goederen en diensten maandelijks de prijs op te meten en deze te vergelijken.

What equals the rate of change in the GDP deflator?

The rate of inflation. The rate of change in the GDP deflator equals the rate of inflation: π1=(Pt-Pt-1) / P(t-1) zie afbeelding

What's the difference between the GDP deflator and consumer price index (CPI)?

The GDP deflator measures the average price of output, while the consumer price index, or CPI, measures the average price of consumption, or equivalently, the cost of living.

What is the consumer price index (CPI)?

The CPI gives the cost in dollars of a specific list of goods and services over time, which attempts to represent the consumption basket of a typical urban consumer.

For which 2 reasons is the set of goods produced in the economy not the same as the set of goods purchased by consumers?

Some of the goods are sold to firms, to the government or to foreigners.
Some of the goods are not produced domestically but are imported from abroad.

For which two reasons do economists care about inflation?

During periods of inflation, not all prices and wages rise proportionately, inflation affects income distribution. Meaning? -> nog opzoeken in boek! Misschien dat minimumloon niet veel hoger wordt en die mensen er dus het meest last van hebben?
Inflation leads to other distortions(=vervormingen, vertekening)