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Ch 5: Inflation Measurement and Adjustment

About This Chapter

Watch these video lessons on inflation measurement and adjustment to explore concepts like the consumer price index and the multiplier effect. Each lesson is accompanied by a short multiple-choice quiz you can use to check your understanding of these economics topics.

Inflation Measurement and Adjustment

You probably have a vague idea of what inflation is, but are you aware of the specific effects it can have? Sure, you've probably heard your parents or grandparents joke about how a hamburger used to cost a quarter when they were a kid, but inflation's impact on the cost of living goes deeper than that. This set of lessons focuses on specifics about inflation measurement and adjustment. Watching these videos will help illustrate the impact inflation can have on various economic elements, including the consumer price index.

Like inflation, you might have heard the phrase consumer price index bandied about by politicians and reporters, but do you know exactly what it means and how it relates to your life? These lessons will teach you about how the consumer price index is tied to inflation and how it relates to the gross domestic product (GDP). You'll also learn that some economists believe that the consumer price index can be an unreliable indicator because of its potential to overstate inflation.

The lessons also explore inflation-related topics, like the economics of demand and how the GDP is adjusted to reflect inflation-related price changes. After watching these videos, you'll have a much more thorough understanding of what inflation is and how deeply it can impact the greater economy. You'll also gain some insight into what can cause inflation to occur in the first place.

12 Lessons in Chapter 5: Inflation Measurement and Adjustment
Consumer Price Index: Measuring the Cost of Living and Inflation

1. Consumer Price Index: Measuring the Cost of Living and Inflation

In this lesson, you'll learn what the Consumer Price Index is and how it measures changes in the level of prices in an economy. You'll also learn about the important economic concepts of inflation and deflation. Why do prices always seem to be going up?

The GDP Deflator and Consumer Price Index

2. The GDP Deflator and Consumer Price Index

Have you ever wondered how inflation is measured? This lesson will compare and contrast two of the indicators used to measure inflation - the consumer price index and the GDP deflator.

Consumer Price Index and the Substitution Bias

3. Consumer Price Index and the Substitution Bias

In this lesson, you'll learn about the Consumer Price Index and how it is measured. You'll also learn why many economists believe that the Consumer Price Index overstates inflation.

Adjusting Wages for the Inflation Rate

4. Adjusting Wages for the Inflation Rate

Have you ever heard your parents complain that a dollar doesn't go as far as it used to? In this practical lesson, learn how to calculate the real wage by adjusting the nominal wage to account for changes in the price level within the economy.

Gross Domestic Product: Nominal vs. Real GDP

5. Gross Domestic Product: Nominal vs. Real GDP

Watch this video and you'll learn the difference between nominal GDP and real GDP with the help of a memorable story about a competition between twin brothers.

Gross Domestic Product: How to Calculate Real GDP

6. Gross Domestic Product: How to Calculate Real GDP

Learn how to adjust economic output for inflation using real GDP. This calculation enables economists to remove the effect of rising prices and more accurately compare economic output from multiple years.

How to Calculate Real GDP Growth Rates

7. How to Calculate Real GDP Growth Rates

How can you tell how much the economy is really growing from year to year? In this lesson, you'll discover the formulas economists use to calculate real GDP growth rates and draw conclusions about real economic growth.

Cost-Push Inflation: How the Supply Side of the Economy Leads to Inflation

8. Cost-Push Inflation: How the Supply Side of the Economy Leads to Inflation

Learn about cost-push inflation, when higher production prices lead to an increase in prices within the economy. Using real-world examples, this lesson describes what it is, what causes it and how economists illustrate it.

The Multiplier Effect and the Simple Spending Multiplier: Definition and Examples

9. The Multiplier Effect and the Simple Spending Multiplier: Definition and Examples

When money is spent in an economy, this spending results in a multiplied effect on economic output. This lesson explains the multiplier effect and the how to use the simple spending multiplier to calculate it.

Demand-Pull Inflation vs Cost-Push Inflation

10. Demand-Pull Inflation vs Cost-Push Inflation

Discover two basic types of inflation, demand-pull and cost-push inflation. Learn what factors cause each type of inflation and some of the key differences between each.

Effects of Inflation on Suppliers and Demanders

11. Effects of Inflation on Suppliers and Demanders

In this lesson, you'll discover who benefits and who suffers from a sustained increase in prices within an economy. We'll cover the effects of expected and unexpected inflation on savers/creditors and borrowers/debtors.

Equation of Exchange & Inflation Rate

12. Equation of Exchange & Inflation Rate

Too much of anything can be bad, and too much money in the economy is no different. In this lesson, you'll learn about the equation of exchange and how it can be used to analyze the rate of inflation and its relationship to the money supply.

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