AP®︎ Macroeconomics: Topic 2.4 Flashcards

A measure showing how the overall price level changes over time relative to a base year.

An index measuring the cost of a fixed basket of consumer goods and services over time.

A fixed sample of goods and services used to track consumer price changes over time.

The reference year for an index, assigned a value of 100.

Cost of market basket in current year divided by cost in base year, times 100.

A sustained increase in the general price level of goods and services in an economy.

A sustained decrease in the general price level of goods and services in an economy.

A decrease in the inflation rate, meaning prices rise more slowly than before.

The percentage change in a price index from one period to the next.

New index minus old index, divided by old index, times 100.

Convert a current-dollar value to a real value by adjusting with a price index.

Income adjusted for inflation, showing purchasing power rather than dollars received.

An upward bias in CPI caused when consumers switch to cheaper alternatives but the basket stays fixed.

It estimates how much income consumers need to maintain the same standard of living over time.

Nominal values use current prices, while real values are adjusted for inflation.

A real value equals a nominal value divided by a price index, times 100.