In the average level of prices such that a price index increase of 10% means that the average level.

In the average level of prices such that a price index increase of 10% means that the average level of prices has risen by 10%.

Price index = current cost of basket/base-period cost of basket

Learning Activity #5: Price Index Exercise

The Federal Reserve has dual targets which are to maintain adequate economic growth rate and to keep a low level of inflation.

Using data from http://www.bls.gov/cpi/ graph the US inflation the rate of inflation or deflation is the percentage rate of change in a price index.

A price index (Chapter 5.2 Price-Level Changes) is a number whose movement reflects movement rate before, during, and after the 2008 recession. Determine which components of the CPI were more volatile (fluctuated the most) and what you think were the factors behind such fluctuations.

 

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