Price index

Chapter 15: The Measurement and Calculation of Inflation ? -How the inflation rate is measured -What a price index is and how it is calculated -The importance of the consumer price index and other price indexes ? Aggregate Price Level: a measure of the overall level of prices in the economy/single number to represent the overall level of prices Market Basket: a hypothetical set of consumer purchases of goods and services/Hypothetical Consumption bundle Consumption bundle: the typical basket of goods and services purchased before the price changes Price index: measure of the cost of purchasing a given market basket in a given year Base year: always results in a price index of 100 Price indexes are also the basis for measuring inflation