EC202 1nd Edition Lecture 13Outline of Last Lecture I. Inflationa. Consumer price indexb. GDP deflatorOutline of Current Lecture II. DeflationIII. Disinflation IV. Adjusting for inflationV. Indexing Current Lecture-deflation: a situation in which the prices of most goods and services are falling over time so that the inflation rate is negative-disinflation: a situation in which the prices of most goods and services are rising over time, but not as rapidly as they had been rising-adjusting for inflation-nominal quantity: a quantity that is measured in terms of its current dollar value-real quantity: a quantity that is measured in physical terms – a measure of purchasing power-deflating: the process of dividing a nominal quantity by a price index to express the quantity in real terms-nominal wage rate: the average hourly wage rate measured in current dollars -real wage rate: the average hourly wage rate measured in the dollars of a given base reference year-indexing: the practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price indexThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-prevents the purchasing power of a nominal quantity from being eroded by inflation-examples: social security payments and federal income tax
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