Unit 2 - Feb. 6 (Inflation vs. Deflation)

Consumer Price Index (CPI) - Measures the cost of the market basket of goods of a typical urban American family.

• Formula : CPI = (Cost of market basket in a given year / Cost of market basket in a base year) x 100

Inflation vs. Deflation

Inflation	Deflation
General rise of the price level.	Fall of the price level.
Ex. : Gas price rises	Ex. : Gas price drops

Rate of Inflation

• [(CPI₂ – CPI₁) / CPI₁] X 100

Gross Private Domestic Investment

• Net Private Domestic Investment + Depreciation (consumption of fixed capital).