Baskets, Base Years, and Bias: Constructing and Using a Student Price Index Lesson Objectives 1. Define key terms such as market basket, consumer price index, inflation, inflation rate, substitution bias, and unmeasured quality changes. 2. Calculate a market basket value, a student price index number, and the inflation rate. 3. Contrast two market basket values, determining reasons for differences in value. 4. Simulate how changes in fiscal policy can affect the price level in the economy. 5. Simulate how changes in the money supply can affect the price of a market basket of goods. 6. Describe how open market operations cause changes in the money supply. 7. Create a short paper or presentation describing the strengths and weaknesses of using a consumer price index as a measure of inflation.
Transcript
Baskets, Base Years, and Bias: Constructing and Using a Student Price Index
Lesson Objectives1. Define key terms such as market basket, consumer price index, inflation,
inflation rate, substitution bias, and unmeasured quality changes.2. Calculate a market basket value, a student price index number, and the
inflation rate.3. Contrast two market basket values, determining reasons for differences in
value.4. Simulate how changes in fiscal policy can affect the price level in the
economy.5. Simulate how changes in the money supply can affect the price of a
market basket of goods. 6. Describe how open market operations cause changes in the money
supply. 7. Create a short paper or presentation describing the strengths and
weaknesses of using a consumer price index as a measure of inflation.
