Chapter 6 Flashcards

1
Q

Consumer Price Index

A

Overall measure of the cost of the goods and services bought by a typical consumer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Why is CPI not a perfect measure of cost of living

A
  1. Commodity substitution bias
  2. Introduction of new goods
  3. Unmeasured quality change
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Indexation

A

The automatic correction of a dollar amount for the effects of inflation by law or contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

COLA

A

Automatically raises the wage when the CPI raises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Nominal interest rate

A

Interest rate that is usually reported without a correction for the effects of inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Real interest rate

A

interest rate that is corrected for the effects of inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly