Give example to calculate the price level, Macroeconomics

Assignment Help:

Give example to calculate the price level

Imagine that we have created a particular basket of services and goods. We calculate price level at four different points in time during 2008 without changing the content of the basket (the weights are unchanged). Assume that we find following time series for price level:

Point in time

Jan 1, 2008

Feb 1, 2008

March 1, 2008

April 1, 2008

Price level

60 770

62 400

62 850

62 850

Reason for choosing 607.70 is that we want index to be equal to 100 for the first point in time. Advantage of having an index which starts with 100 is that we would have a clearer picture of the evolution of prices. We may, for instance, immediately determine that prices rose by 2.68% on average in January and by 3.42% during 3 months January to March.

Note that percentage change of original price level and percentage change of the price index is the same. Percentage change won’t depend on which point in time we select as our “base” (giving price index a value of 100). Using price index, percentage change during January is (62400 – 60770)/60770 = 2, 68% that is exactly the same as percentage change of price index.


Related Discussions:- Give example to calculate the price level

SARB, REASONS TO NATIONALISE SARB

REASONS TO NATIONALISE SARB

Why gdp is determined only by aggregate demand, Q. Why GDP is determined on...

Q. Why GDP is determined only by aggregate demand? Note that we haven't said anything about the aggregate supply so far. In order to justify why GDP is determined only by aggre

Why marketers are interested in discretionary income, Because discretionary...

Because discretionary Income = the money people have left over once they have paid for all of their basic needs (Food, Clothing, Shelter). You could also call it Disposable Inc

What is the macroeconomic policy, Macroeconomic policy Macroeconomic p...

Macroeconomic policy Macroeconomic policy trade-offs are likely along the short-run Phillips curve however are not maintainable in the long run. In the short run a government

What is is-lm model with inflation, Q. What is IS-LM model with inflation? ...

Q. What is IS-LM model with inflation? The IS-LM model with inflation  The basic assumption We developed IS-LM model with constant wages and prices. We can now exten

Describe supply and demand in macroeconomics, Q. Describe Supply and demand...

Q. Describe Supply and demand in macroeconomics? In microeconomics, we are careful to distinguish between demand, supply and observed quantity. The first two are hypothetical c

Define the term- wages and income, Define the term- Wages and income R...

Define the term- Wages and income Remember that by wage we mainly mean what you receive for working one hour, whereas income is the total revenue from all sources over a longe

Financial payments flow between firms and government, Explain whether, the...

Explain whether, the following statements are TRUE, FALSE or UNCERTAIN. Briefly justify your answer. (i) The circular flow shows how real resources and financial payments flow

.sohkhlet, What do is and LM curve signify?

What do is and LM curve signify?

Compare and contrast federal government expenditures, Compare and contrast ...

Compare and contrast federal government expenditures, state and local government expenditures, and financing government expenditures. Suggest a total of three actions that should b

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd