Lesson 5.03 Consumer Price Index and Inflation

Real Value

A value that has been adjusted for inflation.

Nominal Value

A value that is current and not adjusted for inflation.

Demand-Pull Inflation

Inflation that occurs when there is more spending in an economy than the economy has in goods and services.

 

Cost Push Inflation

A type of inflation caused by an increase in the cost of inputs for businesses.

Stagflation

A unique period of high unemployment and high inflation while the economy remains stagnant or without economic growth.

 

COLA

Cost of living adjustment for increases in inflation.

Market Basket

The basket of consumer goods used by the Bureau of Labor Statistics to calculate CPI.

 

Consumer Price Index (CPI)

The Consumer Price Index is used to measure inflation. The formula is (price in a specific year/ price in the base year) * 100.

Expected Inflation

Inflation rates that meet the public's expectations.

 

Unexpected Inflation

An inflation rate that is higher than anyone expected.

 

Bureau of Labor Statistics

The agency within the Department of Labor tasked with calculating CPI.

 

Base Year

The year in which the CPI is 100. Currently the BLS uses the years 1982-1984 as the base year.

Percentage or Rate Change

The formula is (New figure-Old Figure/Old Figure) * 100.

 

Inflation

Usually a period of a rise in the general level of prices associated with a growing economy.

 

Deflation

Usually a period of a decline in the general level of prices associated with a shrinking economy.

Hyperinflation

Inflation occurring at a very high rate.