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Illustrate an example of Consumer Price Index
For instance, if we spend twice as much on apples as on pears, apples would have twice the weight in basket. The precise details of composition of basket and how CPI is computed are complicated and vary somewhat between nations. Figure below displays CPI for Germany after reunification starting at January 1991. This data has 2005 as reference year. This means that CPI is constructed in such a way that CPI is exactly equal to 100 on average during 2005.
Once Y is determined, almost all of the other variables are determined since they are either exogenous or they depend on Y. From Y we can determine C by consumption function, I m
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Illustrate the three approaches of measuring national income? Show that these three approaches give identical result. Explain private saving. How is the private saving used
Calculating interest rates on a yearly basis If the maturity is different from one year, the interest rate is usually recalculated to a corresponding one year rate. For example
By given scenario answer the following questions. 1. What phase of the business cycle is the economy? 2. If inflation increased by 5% during the same period, what was the cha
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Using Simple Keynesian Model, discuss the effect of the following: a) An increase in govt. expenditure. b) A decrease in lump sum taxes. In this context compare the govt.
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explain the phillips curve the relationship of inflation and unemployment
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