1. Correcting Stats for Inflation CHAPTER 13 SECTION 2

2.  Cost of a new home: $89,800.00  Median Income: $20,885.00  Cost of a first-class stamp: $0.20  Gallon of regular gas: $1.24  Cost of a dozen eggs: $0.86  Cost of a gallon of Milk: $2.24 1983 Cost of a new home: $158,700.00 Median Household Income: $34,076.00 Cost of a first-class stamp: $0.32 Cost of a gallon of regular gas: $1.15 Cost of a dozen eggs: $1.16 Cost of a gallon of Milk: $2.96 1995

3. Cost of a new home: $158,700.00 Median Household Income: $34,076.00 Cost of a first-class stamp: $0.32 Cost of a gallon of regular gas: $1.15 Cost of a dozen eggs: $1.16 Cost of a gallon of Milk: $2.96 Cost of a new home: $202,100 Median Household Income: $40,925 Cost of a first-class stamp: $0.44 Cost of a gallon of regular gas: $3.89 Cost of a dozen eggs: $1.25 Cost of a gallon of Milk: $3.39 2011 1995

4.  Prolonged rise in the general price level of final goods and services.  Inflation decreases the Purchasing Power of the dollar. Value of the dollar is lower. INFLATION

5.  Prolonged decline in the general price level of goods and services.  Not as common as inflation DEFLATION

6.  Consumer Price Index (CPI)  Producer Price Index (PPI)  Real GDP MEASURES OF INFLATION

7.  Measure of the average prices of a specified set of goods and services purchased by typical consumers in city areas.  In simple terms – Average change in prices from month to month CONSUMER PRICE INDEX (CPI)

8.  Market Basket – Representative sample of goods and services used to calculate the CPI  80,000 specific goods and services (food, housing, clothing, etc)  Updated every 10 years  Base Year – Year used as a point of comparison CPI (CONT.)

9.  Measure of the change in price over time that U.S. producers charge for their goods and services.  Price change of wholesale goods  Changes in the PPI hint to changes in consumer prices (IE – The price you pay for goods) PRODUCER PRICE INDEX (PPI)

10.  GDP that has been adjusted for inflation - Base year for Real GDP is the year 2000  GDP Price Deflator - Removes the effects of inflation from GDP  GDP inaccurate without figuring in for inflation. REAL GDP