Ch 7 Macroeconomics
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An increase in the general (average) price level of goods and services in the economy.
A decrease in the general (average) price level of goods and services in the ecomony.
Consumer Price Index (CPI)
- An index that measures changes in the average prices of consumers goods and services.
- cost of market basket @ current year / same cost @base year X 100
A reduction in the rate of inflation
The actual # of dollars received over a period of time
- The actual # of dollars received (nominal income) adjusted for changes in the CPI
- nominal income / CPI (fracction or (CPI/100))
Income equivalents' formula
- saalary in given year =
- salary inprevios year X (CPI in given year / CPI in previous year)
The value of the stocks of assets owned at some point in time. Ex: bank accounts, real state, bonds, stocks,cash,etc.
Nominal Interes Rate
The actual rate of interest without adjustment for the inflation rate.
Real Interest Rate
The nominal rate of interest minus the inflation rate.
Adjustable-rate mortgage (RAM)
A home loan that adjust the nominal interest rate to changes in an index rate, such as rates on Treasury securities.
A rise in the general price level resulting from an excess of total spending (demand)
An increase in the general price level from an increase in the cost of production.
An extremely rapid rise in the general price level.
Asituation that occurs when increases in nominal wage rates are passed on in higher price, which, in turn, results in even higher nominal wage rates and prices.
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