question
Consumer Price Index (CPI)
answer
For any period, a measure of the cost in that period of a standard basket of goods and services relative to the cost of the same basket of goods and services in the base year.
question
Price Index
answer
A measure of the average price of a given class of goods or services relative to the price of the same goods or services in the base year.
question
Rate of Inflation
answer
The annual percentage rate of change in the price level, as measured, for example, by the CPI.
question
Deflation
answer
A situation in which the prices of most goods and services are falling over time to that inflation is negative.
question
Core Rate of Inflation
answer
The rate of increase of all prices except energy and food.
question
Nominal Quantity
answer
A quantity that is measured in terms of its current dollar value.
question
Real Quantity
answer
A quantity that is measured in physical terms--for example, in terms of quantities of goods and services.
question
Deflating (A Nominal Quantity)
answer
The process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms.
question
Real Wage
answer
The wage paid to workers measured in terms of purchasing power; the real wage for any given period is calculated by dividing the nominal (dollar) wage by the CPI for that period.
question
Indexing
answer
The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specifies price index. Indexing prevents the purchasing power of the nominal quantity from being eroded by inflation.
question
Price Level
answer
A measure of the overall level of prices at a particular point in time as measured by a price index such as the CPI.
question
Relative Price
answer
The price of a specific good or service in comparison to the prices of other goods or services.
question
Hyperinflation
answer
A situation in which the inflation rate is extremely high.
question
Real Interest Rate
answer
The annual percentage increase in the purchasing power of a financial asset; the real interest rate on any asset equals the nominal interest rate on that asset minus the inflation rate.
question
Nominal Interest Rate (Market Interest Rate)
answer
The annual percentage increase in the nominal value of a financial asset.
question
Inflation-Protected Bonds
answer
Bonds that pay a nominal interest rate each year equal to a fixed real rate plus the actual rate of inflation during that year.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
