Lesson Plan
Measuring the Economy - Inflation
- I. Definitions
- - what is inflation?
- - what is an index?
- II. How are price indexes constructed?
- - determine the market basket
- - assign weights
- - calculate aggregate numbers for each year
- - choose a base year and divide each aggregate number by base
year aggregate number
- - multiply each resultant number by 100
- - real versus nominal variables
- - definition of each
- - using price indexes to get a real variable
- - example
- - example of calculating a price index
- - types of price indexes
- - consumer price index (cpi)
- - producer price index (ppi)
- - GDP deflator
- III. Costs & Benefits of Inflation
- - Repricing costs
- - Distortion costs
- - who wins from inflation?
- - who loses from inflation?
- IV. Types of Inflation
- - Demand Pull Inflation
- - Cost Push Inflation
- - Expectational Inflation