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Chapter 22: Q. 11 (page 553)

How do economists use a basket of goods and services to measure the price level?

Short Answer

Expert verified

By using various methods economists do this task.

Step by step solution

01

Step 1. Definition

Price levels are constituted by index number while the rate of inflation is the rate of growth of price level.

02

Step 2. Basket of goods and services.

Economists measure the price level by a method like first, they give the weights to the goods and services that people buy on actual quantities and then they compute their weighted average of individual baskets.

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Most popular questions from this chapter

What is deflation?

Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?

Identify several parties likely to be helped and hurt by inflation.

Over the last century, during what periods was the U.S. inflation rate highest and lowest?

Why is the GDP deflator not an accurate measure of inflation as it impacts a household?
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