AP Macro: CPI and Inflation

GDP that is NOT adjusted for inflation

• real GDP
• nominal GDP
• price level
• net national product

GDP that is adjusted for inflation

• real GDP
• nominal GDP
• price level
• net national product

The Consumer Price Index (CPI) is best used to determine

• the Dow Jones Index.
• the rate of inflation.
• the unemployment rate.
• currency exchange rates.

When Inflation occurs,

• Price decreases in the economy
• The purchasing power of money decreases in the economy
• The dollar appreciates on foreign exchange markets
• Basic necessities become cheaper

If the Price of the Market Basket in 2008 is $40 and the Price of the Market Basket in the base year is $20, what is the CPI for 2008?

• 2
• 60
• 80
• 200

Did prices go up or down in 2009?
2008 CPI = 212
2009 CPI = 214

• Up
• Down

Shawn just graduated from college. Why might Shawn benefit from rapid inflation in the economy?

• Purchasing a home will be easier.
• There will be more goods to purchase.
• Businesses are more likely to hire during times of inflation.
• Student loan repayments will not cost as much in real dollars.

Which year is the base year?
1997 CPI = 95
1998 CPI = 97
1999 CPI = 100
2000 CPI = 104

• 1997
• 1998
• 1999
• 2000

____________always decreases purchasing power

• fiscal policies
• inflation
• monopoly
• trade barriers

__________ are common products that consumers buy in a month.(used for CPI)

• market basket
• inflation
• fiscal policies
• monetary policy