Ch11 Measuring the cost of living - tài liệu tham khảo | Đài học Hoa Sen

Ch11 Measuring the cost of living - tài liệu tham khảo | Đài học Hoa Se và thông tin bổ ích giúp sinh viên tham khảo, ôn luyện và phục vụ nhu cầu học tập của mình cụ thể là có định hướng, ôn tập, nắm vững kiến thức môn học và làm bài tốt trong những bài kiểm tra, bài tiểu luận, bài tập kết thúc học phần, từ đó học tập tốt và có kết quả cao cũng như có thể vận dụng tốt những kiến thức

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Môn: Corporate Finance (CF2033)

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Profile Kim Oanh
Interactive PowerPoint Slides by:
V. Andreea Chiritescu
Eastern Illinois University
Measuring the
Cost of Living
CHAPTER
NINTH EDITION
N. GREGORY MANKIW
PRINCIPLES OF
MACRO
ECONOMICS
1
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
• What is the Consumer Price Index ( )? CPI
How is it calculated? What’s it used for?
• What are the problems with the ? How CPI
serious are they?
• How does the differ from the CPI GDP
deflator?
• How can we use the to compare dollar CPI
amounts from different years? Why would we
want to do this, anyway?
• How can we correct interest rates for inflation?
IN THIS CHAPTER
2
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
The Consumer Price Index
• Consumer price index ( )CPI
– Measure of the overall cost of goods and
services bought by a typical consumer
– Monitor changes in the cost of living over time
• Core CPI
– A measure of the overall cost of consumer
goods and services excluding food and energy
• Producer price index ( )PPI
– A measure of the cost of a basket of goods and
services bought by firms
3
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
How the Is Calculated – 1 CPI
1. Fix the basket
– The Bureau of Labor Statistics (BLS) surveys
consumers to determine what’s in the typical
consumer’s “shopping basket.”
2. Find the prices
– The BLS collects data on the prices of all the
goods in the basket.
3. Compute the basket’s cost
– Use the prices to compute the total cost of the
basket.
4
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
How the Is Calculated – 2 CPI
4. Chose a base year and compute the CPI
• Designate a year as base year (benchmark)
CPI = [Basket’s cost in current year / Basket’s
cost in base year] × 100
5. Compute the inflation rate
• Percentage change in the CPI from the
preceding period
Inflation rate
CPI CPI this year− last year
CPI last year
5
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
EXAMPLE 1: Market basket: 10 pizzas, 5 shirts
Compute in each year (2017 base year)CPI
2017:
2018:
2019:
year
Price of
pizza
Price of
shirts
Cost of basket
2017 $12 $18
2018 $14 $20
2019 $16 $22
6
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
The typical basket of goods and services
7
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Active Learning 1: Calculate & inflation rateCPI
CPI basket:
10 lbs of beef,
20 lbs of chicken
Base year: 2017
A. Calculate CPI for all years
B. What was the inflation rate from 2018-
2019?
year
Price of
beef
Price of
chicken
2017 $3 $3
2018 $4 $4
2019 $8 $5
8
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Active Learning 2: A new basket, & inflation rateCPI
New basket for 2019: CPI
5 lbs of beef,
25 lbs o f chicken
Base year: 2017
A. Calculate cost of the new basket for 2019
and the CPI for 2019.
B. What’s the new inflation rate from 2018-
2019?
year
Price of
beef
Price of
chicken
2017 $3 $3
2018 $4 $4
2019 $8 $5
9
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Problems with the – 1 CPI
• Substitution Bias
– Over time, some prices rise faster than
others
– Consumers substitute toward goods that
become relatively cheaper, mitigating the
effects of price increases.
– The misses this substitution because it CPI
uses a fixed basket of goods.
– Thus, the overstates increases in the CPI
cost of living.
10
© 2021 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
®
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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N. GREGORY MANKIW NINTH EDITION PRINCIPLES OF MACRO ECONOMICS CHAPTER Measuring the Cost of Living
Interactive PowerPoint Slides by: V. Andreea Chiritescu Eastern Illinois University
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 1 IN THIS CHAPTER
• What is the Consumer Price Index (CPI)?
How is it calculated? What’s it used for?
• What are the problems with the CPI? How serious are they?
• How does the CPI differ from the GDP deflator?
• How can we use the CPI to compare dollar
amounts from different years? Why would we want to do this, anyway?
• How can we correct interest rates for inflation?
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 2
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. The Consumer Price Index • Consumer price index (CPI)
– Measure of the overall cost of goods and
services bought by a typical consumer
– Monitor changes in the cost of living over time • Core CPI
– A measure of the overall cost of consumer
goods and services excluding food and energy • Producer price index (PPI)
– A measure of the cost of a basket of goods and services bought by firms
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 3
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
How the CPI Is Calculated – 1 1. Fix the basket
– The Bureau of Labor Statistics (BLS) surveys
consumers to determine what’s in the typical
consumer’s “shopping basket.” 2. Find the prices
– The BLS collects data on the prices of all the goods in the basket. 3. Compute the basket’s cost
– Use the prices to compute the total cost of the basket.
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 4
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
How the CPI Is Calculated – 2
4. Chose a base year and compute the CPI
• Designate a year as base year (benchmark)
CPI = [Basket’s cost in current year / Basket’s cost in base year] × 100 5. Compute the inflation rate
• Percentage change in the CPI from the preceding period CPI this year−CPI last year Inflation rate CPI last year
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 5
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
EXAMPLE 1: Market basket: 10 pizzas, 5 shirts Price of Price of year Cost of basket pizza shirts 2017 $12 $18 2018 $14 $20 2019 $16 $22
Compute CPI in each year (2017 base year) 2017: 2018: 2019:
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 6
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
The typical basket of goods and services
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 7
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Active Learning 1: Calculate CPI & inflation rate CPI basket: Price of Price of year 10 lbs of beef, beef chicken 2017 $3 $3 20 lbs of chicken 2018 $4 $4 Base year: 2017 2019 $8 $5 A. Calculate CPI for all years
B. What was the inflation rate from 2018- 2019?
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 8
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Active Learning 2: A new basket, CPI & inflation rate New CPI basket for 2019: Price of Price of year 5 lbs of beef, beef chicken 2017 $3 $3 25 lbs o f chicken 2018 $4 $4 Base year: 2017 2019 $8 $5
A. Calculate cost of the new basket for 2019 and the CPI for 2019.
B. What’s the new inflation rate from 2018- 2019?
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 9
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Problems with the CPI – 1 • Substitution Bias
– Over time, some prices rise faster than others
– Consumers substitute toward goods that
become relatively cheaper, mitigating the effects of price increases.
– The CPI misses this substitution because it uses a fixed basket of goods.
– Thus, the CPI overstates increases in the cost of living.
© 2021 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a 10
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.