Describe about price level and time, Macroeconomics

Assignment Help:

Q. Describe about Price level and time?

We are hardly interested in the value of price level at a certain point in time. What we are interested in is percentage change in the price level between two points in time.

We evaluate the percentage change by first creating a basket of services andgoods. At regular intervals (generally once a month on the first day of the month) we measure all prices of the contents of the basket (characteristically as an average of the market) and evaluate the price level. In this way, we would end up with a time series of price levels - one value for each month.

Using this time series we can study how price level progresses over time. If all prices rose by 2% during one month, price level would rise by exactly 2%. If one of the prices rose by 2% whereas the other prices remained unchanged, price level would rise, though by much less than 2%. Exactly how much it would rise will depend on the weight of changed price.

Imagine that we have created a particular basket of services and goods. We evaluate the price level at 4 different points in time during 2008 without changing content of basket (weights are unchanged). Assume that we find the below time series for the price level:

Point in time

Jan 1, 2008

Feb 1, 2008

March 1, 2008

April 1, 2008

Price level

60 770

62 400

62 850

62 850


Related Discussions:- Describe about price level and time

Find out reserve-deposit ratio and currency-deposit ratio , 1.  Assume the ...

1.  Assume the required reserve-deposit ratio is 12%, and the currency-deposit ratio is 38%. How much would money supply change if the Fed made open market purchases of $100 millio

Money supply, different between money multplier vs credit multplier ?

different between money multplier vs credit multplier ?

Robert''s new way vacuum cleane, Robert's New Way Vacuum Cleaner Company is...

Robert's New Way Vacuum Cleaner Company is a newly started small business that produces vacuum cleaners and belongs to a monopolistically competitive market. Its demand curve for t

Question one hw, A small country can import a good at a world price of 10 p...

A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is S = 20 + 10P The demand curve is D = 400 – 5P In addition, each unit of

Free trade help the u.s. economy, Why and how does free trade help the U.S....

Why and how does free trade help the U.S. economy? How might free trade hurt the U.S. economy?

Answer for questions, How can we answer in Economic terms this questions: W...

How can we answer in Economic terms this questions: Why should the government consider to increase tax on cigarette

Full economic price of this legislation, From California to New York, legis...

From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $14 mill

Are credit cards, It is sometimes asked whether credit cards are money sinc...

It is sometimes asked whether credit cards are money since many purchases are made using these. Credit cards are a means of obtaining credit and using this to finance expenditure,

Differentiate between actual and potential output, Differentiate between Ac...

Differentiate between Actual and Potential output.  Actual output is that level which economy in fact produces. In contrast, potential output is the aggregate capacity output o

Circular flow of income in a simple economy income consumed, The circular f...

The circular flow of income in a simple economy where all income is consumed  The operation of forces in an economy can be expressed in the form of a circular flow of incomes a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd