Consumer Price Index questions with correct answers

Consumer Price Index Inflation A sustained increase in the overall level of prices of goods/services in an economy over a period of time. Disinflation A slowdown in the inflation rate. Deflation A decrease in the overall level of prices of goods/services in an economy over a period of time. Consumer Price Index (CPI) A measure of the weighted average change of prices for goods/services bought by a typically family. CPI Calculation CPI = Cost of Basket in Current Year / Cost of Basket in Base Year X 100 Inflation Rate CPI of this Year - CPI of last Year / CPI of last Year X 100 CPI as an Economic Indicator A measure of inflation CPI as Indexing Converting real quantities into current dollars CPI as Deflating Converting quantities measured in current dollars into real values, eliminating effects of inflation Problems with CPI New goods, quality bias, and substation bias GDP Chain Price Index A measure of the weighted average change of all new final goods/services produced in the United States. Producer Price Index (PPI) A measure of the weighted average change of price of common inputs bought by producers. It is used to predict future inflation. Nominal Interest Rate (i) The quoted interest rate. Real Interest Rate (r) The interest