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Chapter 9: Q 20. (page 243)

What is indexing?

Short Answer

Expert verified

Price index is an indicator that shows changes in the price level of a select basket of goods. Its a financial tool used to make policies.

Step by step solution

01

Step 1. Introduction

Indexing is used by economists to tell the market trends to the public.

02

Step 2. Definition

Indexing is a method of creating an indicator to measure changes in variables such as price level.

It is used as a statistical measure for tracking economic data like inflation, unemployment, productivity, market returns, and GDP.

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Most popular questions from this chapter

Table 9.4 shows the fruit prices that the typical college student purchased from 2001 to 2004. What is the amount spent each year on the “basket” of fruit with the quantities shown in column 2?

If inflation rises unexpectedly by 5%, would a state government that had recently borrowed money to pay for a new highway benefit or lose?

22. 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?

A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3%, what would likely happen to a homeowner with an adjustable-rate mortgage?

Go to this website (http://www.measuringworth.com/ppowerus/) for the Purchasing Power Calculator at Measuring Worth.com. How much money would it take today to purchase what one dollar would have bought in the year of your birth?
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