Price Indexes

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Price Indexes
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Gross Domestic Product

• Remember
• THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES
  PRODUCED IN A YEAR WITHIN A COUNTRY.

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Price Indexes

• But how do we know how much of the growth of the
  GDP is due to inflation, and how much is due to
  the growth of the economy?
• Price indexes answer this question

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Price Indexes

• Price Index a measure of the average price
  level in an economy

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Price Indexes

• Price Indexes are used to
• Measure inflation
• 2) Measure the growth of the real economy

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Price Indexes

• Price Index price of market basket
• in a specific year (100)
• price of same market basket in base year

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Types of Price Indexes

• A) GDP Price Deflator
• B) Consumer Price Index
• C) Producer Price Index

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GDP PRICE INDEX

• A very broad measure of the prices of goods and
  services included in the GDP.
• The most accurate of the price indexes.

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CONSUMER PRICE INDEX

• A measure of the average price of goods and
  services purchased by the typical household.

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PRODUCER PRICE INDEX

• A measure of average price received by producers
  (businesses).
• Also known as the wholesale price index.

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Nominal vs. Real GDP

• Nominal GDP output in terms of the
• current dollar value
• Real GDP output in terms of constant
  price